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Jeremy Hunt and his team are considering not holding another autumn statement on tax cuts before the next election, amid uncertainty over the public finances.
The chancellor has already hinted that he plans to promise further tax cuts – including another initial payment for Rishi Sunak’s ambition to scrap National Insurance – ahead of a general election expected to be held in the autumn. He also remains under pressure from the party’s right to cut taxes.
whatever Observer understands Hunt may choose to include further tax-cutting promises in the next Tory manifesto rather than hold a final so-called “fiscal event”, which would require a detailed analysis of the public finances by the Office for Budget Responsibility (OBR).
This comes amid signs that public finances may be in worse shape this fall than expected. There is also frustration among senior Tories that the billions spent on two cuts to employees’ national insurance contributions do not appear to have helped the party bounce back in the polls.
Although some sort of financial report is due later this year, it is usually only done in October or November by convention. A Treasury source said no decisions had been made on the autumn statement, adding that whether one would be held depended on when the prime minister decided to hold the next election. One figure said the window to make such a statement stretches from September to December, which could push it beyond the election.
The Treasury must notify the OBR 10 weeks before such an event takes place to allow it to publish up-to-date information on its impact on the public finances and make new forecasts about the health of the economy.
Hunt recently raised the possibility of further cuts to National Insurance, saying he would make the move this autumn “if we can”. However, he also promised that he would only undertake the move, costing around £9bn, if he could do so in a way that was fiscally responsible.
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Another 2% cut, promised in a manifesto, will allow the party to boast it will halve national insurance from 12% to 6% if it wins the election. It would also mark another step towards Sunak’s stated ambition to abolition of national insurance in general – a promise Labor criticized as a £46 billion unfunded policy.
However, official figures suggest Hunt may have less scope for tax cuts in the Autumn Statement than was thought just a few weeks ago. The latest figures from the Office for National Statistics show that the government borrowed more in the last financial year than expected. It has borrowed £120.7bn in 2023-24, £6.6bn more than the OBR forecast. Tax receipts in March were around £5 billion below the OBR’s expectations in the run-up to the last Budget, as a result of weaker receipts from income tax and national insurance.
Sunak and his chancellor found themselves in control of a tax burden that continues to grow, heading for a post-war peak, according to current projections. As a result, a lot economists signaled that public services – especially those not shielded from cuts – will have to be hard pressed if further tax cuts are sanctioned.
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