Hunt Eyes Tax Cuts After Record Budget Surplus
The UK had its largest ever budget surplus last month, providing a significant boost for Chancellor Jeremy Hunt ahead of his upcoming fiscal announcement next month, the last before the next general election. The Office for National Statistics reported that tax income outstripped expenditures by nearly GBP17bn, a figure that is over twice the surplus recorded last year. Consequently, the budget deficit for the first ten months of the fiscal year stood at £96.6bn, which is just over GBP9bn lower than the forecast by the Office for Budget Responsibility.
The undershoot will raise the prospect of tax cuts in the March budget. Hunt continues to come under pressure from his Conservative party to help rescue their political fortunes ahead of a general election expected either later this year or early 2025. In power since 2010, the Tories are trailing the Labour in the opinion polls by an average of 20%.
According to the Resolution Foundation, Hunt will have around GBP23bn of headroom for pre-election giveaways, and as the Chancellor has made no secret of his ambition to cut taxes before we go to the polls, he will have to deliver.
So, where could he cut taxes? He could knock 2% of the 20% basic rate of income tax, costing GBP14bn. Following on from November’s cut in national insurance, another 1% cut would cost GBP5bn. Raising or withdrawing the child benefit threshold, between GBP2bn and GBP4bn. Cancelling the planned 5p increase in fuel duty, GBP2bn.
He could change the planned increase to stamp duty in 2025, or even end the fiscal drag that has been in place since 2021, not expected to end until 2028. Over 4 million more workers now pay income tax compared to just three years ago, with 1.6 million more people finding themselves in the 40% tax bracket compared to before the measure was brought in.
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