Jeremy Hunt and his team are contemplating the possibility of forgoing another tax-cutting autumn statement before the upcoming election amidst uncertainties surrounding the state of public finances.
The chancellor has hinted at his intention to promise further tax cuts, including progress towards Rishi Sunak’s goal of eliminating national insurance, ahead of the anticipated autumn general election. He is also facing pressure from within the party to lower taxes.
However, sources reveal that Hunt might choose to incorporate additional tax-cutting pledges into the next Conservative manifesto instead of organizing a final “fiscal event,” which would necessitate a thorough assessment of the public finances by the Office for Budget Responsibility (OBR).
This consideration arises amid indications that the public finances might be in a more precarious state this autumn than initially anticipated.
There is also a sense of disappointment among senior Tories that the significant expenditure on two cuts to employee national insurance contributions has not led to an improvement in the party’s standing in the polls.
While some form of financial statement will have to be made later this year, it typically occurs in October or November by convention.
A Treasury source notes that no decisions have been made regarding an autumn statement, emphasizing that its occurrence depends on the timing of the next election as determined by the prime minister.
The timeframe for holding such a statement extends from September to December, potentially extending beyond an election.
The Treasury must provide the OBR with a 10-week notice before convening such an event, allowing for an evaluation of its impact on public finances and revised economic forecasts.
Hunt has recently hinted at the possibility of further reductions in national insurance, affirming his willingness to pursue this in the autumn “if we can.”
However, he has emphasized the importance of fiscal responsibility in implementing such measures, especially considering the estimated £9bn cost. Another 2% cut, as promised in a manifesto, would enable the party to highlight its achievement of halving national insurance from 12% to 6% if victorious in the election.
This would also align with Sunak’s ambition to ultimately abolish national insurance, a pledge criticized by Labour as an unfunded £46bn policy.
However, recent official figures suggest that Hunt may have limited room for tax cuts in an autumn statement, given higher-than-expected borrowing in the previous financial year.
This challenges the feasibility of further tax reductions, with projections indicating a growing tax burden, potentially necessitating severe cuts to unprotected public services.
