UK finance minister Hunt rules out near-term tax cuts

Britain’s finance minister Jeremy Hunt ruled out near-term tax cuts ahead of a mid-year fiscal statement due on Nov. 22, but said in a newspaper interview he wanted to avoid “a vicious circle of ever-rising taxes”.

Many lawmakers in Britain’s ruling Conservatives want Hunt to deliver tax cuts before the next election, as their party heavily trails the opposition Labour Party in opinion polls.

“We’re not in a position to talk about tax cuts at all,” Hunt said in an interview with The Times newspaper, ahead of his Conservative Party’s annual conference, which starts on Sunday.

Throughout this year, Hunt has said his priority is to support Prime Minister Rishi Sunak’s goal to halve inflation, rather than lower taxes, and in a Bloomberg TV interview earlier this month he said tax cuts were “unlikely”.

“The question we have to answer for the British people is: what are you doing to get yourself in a position where you can credibly lower taxes?”, Hunt told The Times.

On Friday, the Institute for Fiscal Studies, a non-partisan think tank, said tax revenue was likely to represent 37% of annual economic output at the time of the next election expected in 2024, up from 33% in 2019 when the Conservatives last won an election, under then-Prime Minister Boris Johnson.

This would be Britain’s highest tax rate since at least the 1950s, although below most other similar European economies.

Liz Truss, another former Prime Minister, was among a number of Conservative lawmakers who pledged on Saturday they would not support “any new taxes that increase the overall tax burden”.

Promises of lower taxes, which are popular with ordinary Conservative Party members, helped Truss defeat Sunak in a party leadership contest during July to September 2022.

She resigned in October 2022 after just 44 days in office, when her plans to reverse tax rises and spend more on energy subsidies led to a surge in government borrowing costs, forcing an intervention by the Bank of England.

Hunt said there needed to be greater technology investment in public services to boost the output of existing staff, rather than the more popular approach of focusing on staff numbers.

“We need to find a formula that doesn’t mean that we’re on a vicious circle of ever-rising taxes,” he said.

Finance ministry estimates suggested the annual growth rate in public-sector productivity needed to be 0.5 percentage points higher to stabilise Britain’s tax burden, he added.