Chancellor Jeremy Hunt has reportedly scrapped plans for a cut to income tax following the news that the UK economy fell into a recession towards the end of last year.
Mr Hunt is said to have been considering the slashing the basic rate of income tax from 20 per cent to 18 per cent.
Another cut to National Insurance employee contributions by two per cent was also floated as an alternative.
It appears these plans have been axed when the Office for National Statistics (ONS) announced yesterday that the economy contracted by 0.3 percentage points in the last three months of 2023.
Do you have a money story you’d like to share? Get in touch by emailing money@gbnews.uk.
Tax cuts are reportedly being reconsidered by Chancellor Jeremy Hunt
GETTY
This means the country experienced a technical recession last year due to the country seeing two consecutive quarters of negative gross domestic product (GDP) growth.
New forecasts following this recession shock suggest the soaring cost of managing public debt mean Mr Hunt has less fiscal headroom in the Budget to cut taxes than originally thought.
Speaking to The Telegraph, a source from The Treasury said: “The world has changed. Everything you thought was going to happen [at the Budget] may now not happen.”
Reacting to the GDP figures yesterday, the Chancellor defended Prime Minister Rishi Sunak’s record when it comes to the economy.
“When the Prime Minister made his commitment he was very clear that tackling inflation had to come first… If we stick to our guns now, we can actually see light at the end of the tunnel,” Mr Hunt said.
The Chancellor denied failing to prepare for, or inform the public, that the UK economy was at risk of contracting.
He added: “That’s not true. When I did the autumn statement just after I became Chancellor, the forecasts were that the economy will contract by 1.5 per cent in the next year.
“We stood behind those forecasts, and this is a Prime Minister who sticks to his plan when the data is encouraging, or even when it’s challenging like today.”
LATEST DEVELOPMENTS:
The Government has promised to ease the tax burden
PAThe PA news agency reports that Mr Hunt is exploring cutting billions of pounds from public spending plans to make room for tax cuts.
While he did not give any insight into what will be included in the Budget, the Chancellor suggested that countries with “lighter tax” do “grow faster”.
The ONS’s chief economist cited worklessness as being a contributing factor to the UK’s weaker growth in comparison to other countries with 9.25 million people classed as being economically inactive.
Mr Hunt will outline any potential tax cuts during his Spring Budget announcement in the House of Commons on March 6.
