Chancellor Jeremy Hunt has given a strong indication that tax cuts will be implemented when the Budget is delivered this week. The move comes amid increasing pressure from Conservative MPs to reduce taxes, which are currently at their highest levels ever. The Budget announcement on Wednesday is expected to detail how the government will handle both spending and tax. Although the Chancellor has expressed a desire for lower taxes, he has emphasised that any cuts will be responsible.
The Labour political party blasted Hunt, declaring that people will continue to be worse off no matter what he does, citing Tory Party failure over the past 14 years. A likely option for the Chancellor is further reduction of national insurance, which was already reduced to 10% from 12% in 2018. Speaking with BBC’s Sunday programme, Hunt said that long-term growth was the primary goal of the Budget and that lower taxes were essential to achieving this.
Fastest-growing economies in North America and Asia are those with lower tax rates, stated Hunt, adding that the government would only achieve a reduction in taxes responsibly. Moreover, the Chancellor suggested that this could be undone if taxes should increase. Despite last year’s reduced national insurance, record levels of taxes continue, with an estimate of £30bn surplus by the Office for Budget Responsibility (OBR) earlier this year. However, due to a decline in borrowing costs, that estimate fell to roughly £13bn in the middle of November 2019.
The Institute for Fiscal Studies (IFS) warns that tax cuts are likely to lead to reduced spending in the future. Hunt emphasised that people desire better public services and lower taxes, with efficiency being central to achieving this. Budget proposals have already revealed an £800m package for NHS and police reforms aimed at AI and drones technology.
Other proposals under review include the potential addition of a vape tax and non-dom tax status. A non-dom resident is defined as someone who is domiciled overseas for tax purposes but lives in the UK. Currently, they do not need to pay UK tax for non-UK based income. There are, however, calls for an end to non-dom status to spend money generated on social amenities such as schools and the NHS. The Chancellor did not comment on any specific changes to tax, remarking that there would be “no gimmicks” on Budget day
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