Jeremy Hunt gets a £56billion Budget boost as falling energy prices and a stronger economy put public finances in a better position than expected - but he now faces calls to deliver tax cuts
- The boost comes after the economy strengthened and energy prices fell
- Read more: Pack of cigarettes set to rise by £1.15 as Hunt hikes tobacco duty
The Chancellor will have an extra £56billion of budget firepower, leading economists have said as pressure mounts on him to deliver tax cuts on March 15.
Jeremy Hunt has been given the boost thanks to falling energy prices and a stronger economy which have left the public finances in a better position than predicted during the Autumn statement, according to the Institute of Fiscal Studies (IFS).
The Treasury has also benefited from lower interest payments on Britain’s mammoth national debt and a surprise rise in receipts from income tax and national insurance.
Public sector borrowing is already £31billion lower this year and the IFS is now forecasting £25billion less spending next year. The Treasury is also holding £13billion in reserve which could be used for one-off spending commitments.
The IFS said Britain’s level of corporation tax will become one of the highest in the OECD group of rich countries after it rises from 19 to 25 per cent from April.
Chancellor Jeremy Hunt will have an extra £56 billion in the Budget, according to leading economists
Clothes seller Primark yesterday called on the Government to extend tax breaks for business investment to counteract the hike.
But Paul Johnson, the head of the IFS, warned that taxes will not fall from their current record high levels for three decades.
He said: ‘I’d be very surprised if taxes come down consistently below that sort of level in my lifetime.’
The IFS said the spare cash the Treasury now has does not necessarily justify permanent tax cuts because predicted low growth from 2025 will constrain the public finances.
It described the outlook as ‘murky’, pointing to ‘dismal’ forecasts from the Bank of England that suggested the UK will record GDP growth of just 1 per cent – far below the pre-financial crisis trend of 2.7 per cent.
Instead, the think-tank said the cash could be used for one-off payments to break the deadlock in public sector pay disputes or to boost efforts to cut NHS waiting lists.
In the Budget, Mr Hunt may look to extend the energy price guarantee – which presently caps bills at £2,500 for an average household but is due to rise to £3,000 in April – at its current level for another three months at a one-off cost of £2.7billion because it is ‘cheap and politically popular’, Mr Johnson said.
But pressure continued to mount on the Chancellor to cut taxes to boost growth and investment in the UK. It comes after AstraZeneca chose the low-tax Republic of Ireland over the UK to build a new £320million factory.
The war in Ukraine threatens to obliterate the UK’s ‘peace dividend’, which has allowed tens of billions of pounds to be redirected from defence to health spending in the last three decades. And experts have warned tight public spending pencilled in for after the next general election may be impossible to deliver because departments such as the Ministry of Justice are already running on a shoe-string after years of austerity.
The Chancellor is expected to freeze fuel duties at the Budget – a £6billion tax cut for motorists and businesses.
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