Jeremy Hunt says he’ll ‘cut taxes when we can’ amid budget backlash

Jeremy Hunt evaded committing to tax cuts before the election today amid backlash over the charge hitting a new postwar high.

Defending his budget in a round of interviews, the foreign minister simply insisted that the government “will cut taxes when we can.”

He also avoided criticism that the much-vaunted new childcare provision for children under three will not be fully implemented for more than two years, saying ministers are moving as fast as they can.

Hunt sprang into action the day after it was confirmed that millions of Britons will be forced to pay more income tax, bringing an extra £120bn in revenue to the Treasury over the next five years.

Tax thresholds have been frozen, meaning that even though wages aren’t rising enough to keep up with the cost of living, many employees are still being pushed into higher bands.

Meanwhile, Mr. Hunt arranged for a major childcare cash injection as he strives to curb rising levels of economic slack post-Covid.

Most parents will get 30 free hours starting at nine months of age, instead of four, but the policy will be phased in and won’t go into effect until September 2025.

There is also a commitment for all schools to offer comprehensive care and breakfast clubs, but that will not be implemented until September 2026.

Hunt told Sky News the government was going “as fast as it could” on childcare.

“This is the biggest transformation in child care in my life,” she said.

‘It’s a big change and we’re going to need thousands more day care centers, thousands more schools that offer services that they don’t currently offer, thousands more childcare providers.

‘We are going as fast as we can so that the offer in the market expands.

“But it’s the right thing to do because we have one of the most expensive childcare systems in the world and we know it’s something that’s a big concern, for women in particular, who have this cliff when maternity leave ends.” after nine months, there is no help until the child is three years old and that can often be the end of her career.

“So I think it’s the right thing for a lot of women to introduce these reforms, and we’re introducing them as fast as we can because we want to remove those barriers to work.”

The chancellor is also embroiled in a bitter dispute over the abolition of the £1.1m lifetime cap on tax-free pensions. Labor has vowed to reverse the move, with complaints that it only benefits the ‘rich few’.

Critics say the policy will cost £1.2bn in revenue and only increase jobs by 15,000.

But Mr Hunt replied: “I think if you talk to anyone in the NHS they will say that doctors leaving the workforce because of pension rules is a big problem.”

‘It’s something, by the way, that Labor stood up for last September.

‘(Shadow health secretary) West Streeting said we should get rid of the cap on pensions, the lifetime allowance.

‘He seems to have changed his mind about that overnight. She said that she was crazy and that it would save lives to get rid of that limit.

‘Well, he was right in September when he said that.’

The tax burden is on track to reach 37.7 percent of GDP, the highest level since World War II, according to the Office for Budget Responsibility.

That is also partly due to the increase in the corporate tax rate in April from 19 percent to 25 percent, despite calls by business leaders and Conservative MPs to remove the increase.

The corporate tax to GDP ratio will rise to its highest level since it was introduced in 1965.

The forecast for the overall tax burden is even higher than the 37.1 percent forecast in the OBR’s latest forecast in November.

It means that within five years, 3.2 million who were not previously subject to income tax will be forced to pay it, while almost 2.5 million will move to higher brackets.

It comes after then-foreign minister Rishi Sunak announced in 2021 that income tax thresholds would be frozen up to and including the 2025-2026 fiscal year.

Under the ‘personal allowance’, anyone earning less than £12,570 does not have to pay income tax.

But the freeze means that if their wages rise above this, and even though inflation is affecting the value of those wages, they will be liable at a rate of 20 percent.

That will affect 3.2 million in the next five years, creating 9 percent more taxpayers, the OBR calculates. The 20 per cent rate applies to winnings up to £50,270 and above that amount, winnings are subject to 40 per cent tax.

That threshold has also been frozen. It means that 2.1 million more taxpayers will be included in this group by 2028.

A third ‘extra rate’ threshold applies to income of just over £125,000 and above, taxing the gains at a rate of 45 per cent. The number of those subject to this tax will increase by 47 percent or 350,000.

OBR’s analysis shows that the freezes will add £12bn to tax take during the 2023/24 tax year, rising to £29.3bn by 2027/28. It all adds up to an additional £120.4 billion for the Treasury. The budget forecast also shows borrowing for the current fiscal year 2022/23 will be £152.4bn, £24.7bn less than forecast in November.

This is due to a better-than-expected economic outlook and the falling cost of the government’s power price freeze, a result of lower global prices.

However, budget measures to keep energy bills low, support business investment and encourage more people to return to work mean it has already spent two-thirds of the windfall from the improved tax outlook, the OBR said.

It means that while Hunt is on track to meet the government’s target of seeing debt as a percentage of GDP fall within five years, that is “only by a very narrow margin,” the OBR said. And that will only be after the debt reaches its highest level in more than 50 years.

The expected ‘headroom’ of £6.5bn will be the lowest for any chancellor since the watchdog was established in 2010.

Debt interest spending is on track to reach £114.7bn, or 11.2% of GDP, in 2022/23, its highest level since shortly after World War II.

That’s because the interest paid on much of the government’s debt is linked to inflation, which has skyrocketed.

Conservative MP Simon Clarke, the former chief treasury secretary, told LBC that the danger of the tax burden reaching its highest level since the war “is not a tenable position”. It is not good for growth.

Paul Johnson, Director of the Institute for Fiscal Studies, said: “The government remains on track to meet its relatively loose fiscal targets by minimal margins, despite a record high tax burden and some extremely tight post-election figures for public service spending.

‘We are still in the midst of a hugely difficult period for households. We are by no means out of the woods yet.