Jeremy Hunt is taking a “risk” by imposing tax cuts as he hedges his bets on current forecasts, according to IFS director Paul Johnson.
The Chancellor announced plans to cut the main rate of national insurance from 12 per cent to 10 per cent.
He claims the change would save someone earning £35,000 more than £450.
Speaking to GB News, Paul Johnson attributed Hunt’s shift on tax cuts to a change in forecast, but warned this could be a short term windfall for the Government.
Paul Johnson says Jeremy Hunt has taken a ‘risk’
GB NEWS
GB News Political Editor Christopher Hope questioned Johnson on what has changed from Hunt’s stance in September where tax cuts were “impossible”.
Johnson responded: “It looks like the forecasts have changed, but only a little bit.
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Jeremy Hunt outlined his autumn statement
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“The Chancellor has a particular fiscal rule, a strange one, about debt falling in five years time and it looks like he has got a little bit of space against that.
“He has used some of that to cut taxes. The risk of that is the forecast moving the other direction before a March budget.
“He would be really scrabbling around for how he is going to meet that rule.”
Hope then pressed Johnson on whether politics is at play in Hunt’s statement with an election potentially on the horizon.
“There’s politics here, tax cuts in the short run”, he said.
“There’s long run stuff as well. The full expensing for corporation tax isn’t going to play particularly strongly on the doorstep.
“He spent a lot of money on that in the immediate run with a lot of things for businesses as well.
“I think we’ve got a combination of giveaways for election things and some focus on growth too.”
The Chancellor also confirmed a tax break, known as full expensing, which allows firms to cut their bills if they invest in new equipment, will be made permanent in what he claimed was the “biggest business tax cut in modern history”.
Hunt’s measures has done little to stifle senior Tories’ demands for further tax cuts, with Priti Patel among the notable names calling for him not to relent.
