Jeremy Hunt hints at voter-friendly tax giveaway in March budget

The Chancellor Jeremy Hunt has dangled the prospect of big tax cuts in his March budget, in what is seen as one of the last opportunities for the Conservatives to claw back Labour’s huge opinion poll lead.

In his first public comments on his budget strategy, Hunt made clear that only unexpected bad news over the coming weeks would prevent him from answering the call from Tory MPs for a substantial giveaway ahead of what is expected to be an autumn general election.

Speaking in Davos, where he is attending the annual meeting of the World Economic Forum, the chancellor said: “In terms of the direction of travel we look around the world and we note that the economies growing faster than us in North America and Asia tend to have lower taxes, and I believe fundamentally that low tax economies are more dynamic, more competitive and generate more money for public services like the NHS.

“That’s the direction of travel we would like to go in but it is too early to say what we are going to do.”

Hunt’s precise room for manoeuvre will only become clear when he receives forecasts for the economy and the public finances over the coming weeks, but the picture has brightened since last November’s autumn statement due to falling inflation and expectations of interest rate cuts from the Bank of England.

The chancellor has come under pressure to cut taxes amid forecasts from the Office for Budget Responsibility that they are heading for their highest level since the 1940s. Repairing the damage to the public finances caused by the Covid pandemic and subsidising energy bills following Russia’s invasion of Ukraine resulted a multiyear freeze in tax allowances and thresholds.

After providing permanent tax breaks for business investment and cutting national insurance in last November’s autumn statement, Hunt is set to focus on income tax in the budget on 6 March. He did not rule out the possibility of a second pre-election package of measures in the autumn but said that would depend on the poll date chosen by Rishi Sunak.

“The prime minister hasn’t decided on the date of the election yet, or if he has he hasn’t told me. By law there have to be two fiscal events each year. We will see where we get to after the spring budget.”

Hunt said the OBR’s assessment of the public finances for the Budget could change right up to the last minute, but added: “I want to be open with you. I do believe the economy would be more successful if we had more competitive taxes.”

Asked whether it was irresponsible to cut taxes when debt as a share of national income was close to 100%, Hunt said: “It depends on how you fund the tax cuts. If you fund them by a significant increase in borrowing then you are just sending the bill to future generations.

“If it is through inherent growth in the economy – and you can still see debt falling over a five-year period – it can be very pro-growth.”

Hunt arrived in Davos early on Thursday morning, flying in by private jet after voting in the Commons on the government’s Rwanda bill.

In his absence, the shadow chancellor Rachel Reeves made a pitch for the support of the assembled business leaders, hosting a breakfast organised by the US bank JP Morgan, and talking on a panel about Labour’s supply-side measures to boost growth.