The Chancellor Jeremy Hunt has suggested the Government could introduce tax cuts in 2024 if the UK’s debt interest comes down.
According to Mr Hunt, the Government plans to “cut the tax burden if we are able to” in the New Year before the next General Election which must take place before January 2025.
The Chancellor made the comments while speaking to Bloomberg TV while in Switzerland to sign a new financial services agreement.
With Labour 20 points ahead of the Conservative Party in the polls, many Tory MPs believe a round of tax cuts will be essential to regaining the trust of voters.
The Chancellor has suggested tax cuts could be introduced next year
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He explained: “If debt interest payments go down then potentially that gives me more headroom and I could use that in lots of different ways but I would never use it in a way that would compromise the battle against inflation.
“We would like to bring down the tax burden in a way that is responsible.”
Britons have been straddled with high borrowing costs due to the Bank of England’s series of interest rate hikes over the past year-and-a-half to mitigate the impact of inflation.
With inflation easing, borrowing costs are expected to fall with Oxford Economics’ economist Andrew Goodwin claiming the Government has £11billion in “headroom” for pre-election tax cuts.
This is thanks to a significant drop in market interest rate estimates in the last couple of weeks from analysts.
As it stands, the market is forecasting the UK’s base rate will be slashed from 5.25 percent to four percent next year.
Despite Jeremy Hunt floating the idea of tax cuts, the tax burden under the Conservative Government is expected to reach a high since World War Two.
This is primarily due to a sharp rise in debt to 97.5 per cent of gross domestic product (GDP) following the pandemic.
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The tax burden is the highest its been since WWII
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Furthermore, the rate of Consumer Price Index (CPI) inflation eased to 3.9 percent in the year to November 2023 but it still remains higher than the central bank’s two per cent target.
Mr Hunt has reiterated that “there is still work to do” by the Government in helping bring inflation down further.
According to the Chancellor, Britons will “start feeling more optimistic about their personal finances if they see interest rates on a downward trajectory”.
The Bank of England’s Monetary Policy Committee (MPC) is next set to meet to discuss interest rates on February 1, 2024.