Jeremy Hunt: ‘The public are at their limit over taxes’
It is the kind of observation you would expect to hear from one of the Chancellor’s political opponents – perhaps someone on the Right of the Conservative Party, voicing their frustration at the ever rising tax burden.
But this week it was Jeremy Hunt himself who acknowledged that the British people have “come to the limit of how high they’re prepared to see their taxes go” as he spoke to The Telegraph.
In the interview, he admitted he was not happy with the overall tax burden, nor was he content with the level of fiscal drag which forces millions of workers into higher income tax bands.
Indeed, the Chancellor said it was a “moral imperative” to leave as much of people’s money in their own pockets as possible.
But after expounding on these lofty ideals, he went on to elegantly prepare the ground for what will likely be minimal tax cuts in this week’s Budget by saying: “I also want to grow the economy”.
The British people currently carry the heaviest tax burden since the Second World War. Taxes as a share of GDP will hit a new post-war high of nearly 38pc by 2029 according to the last official forecast by the Office for Budget Responsibility (OBR) in November, having stood at 33pc before the pandemic.
Mr Hunt insisted that he did want to bring taxes down, but added: “We’re only going to do so in a responsible way and in a way that supports economic growth. The most unconservative thing I could do would be to take risks with public finances. If you look at some of the great reforming chancellors, they would cut taxes when they responsibly could. But they did not take risks with the economy and I certainly won’t take any risks.”
Refusing to be drawn on whether taxes would be cut by the next election, he said: “I’m going to be honest with people on Wednesday, that it’s a long path to bring it down.”
Asked what his message would be to Telegraph readers who feel the tax burden is incredibly high and there is no end in sight, he said it is: “Stick with the plan and we’ll bring those taxes down. But there’s no easy path.
“You wouldn’t want a chancellor who pretended that you can get there all in one go. Margaret Thatcher, who was the prime minister who inspired me to go into politics, brought taxes down over a decade.
“But the biggest tax cuts that she introduced were actually not until she’d been in power for nine years. The reason Nigel Lawson’s great tax‑reforming budget of 1988 was so historic was because when he did that people knew those tax cuts were permanent.
“So I will be responsible with public finances. That’s the biggest single reason why people vote Conservative. They trust us with their money and trust us with the economy. And I will demonstrate that responsibility with my approach to public finances.”
No radical tax cuts
Mr Hunt went some way to explaining why he will not be making the radical tax cuts that many are calling for, both within his party and among the wider public.
Speaking exclusively to The Telegraph, he confirmed that he had received the final official forecast from the OBR ahead of the Budget. The Chancellor received one on Wednesday, with a further and final update on Friday.
“The process happens over several weeks and you get economic forecasts, which are part of GDP and inflation and fiscal forecasts which are what they expect to happen to tax receipts,” he said.
“And broadly, they have gone against us. We don’t have as much of a positive outlook as we had at the end of the Autumn Statement.
“So it’s going to be a Budget where we stress the progress we’ve made on bringing down inflation, but also the importance of being responsible with the country’s finances because it’s fundamentally unconservative to fund all the things that you would like to do by borrowing money for future generations. And so, we will take a very disciplined and responsible approach to all the decisions that are taken.”
Gloomy forecasts
Many Tory MPs privately believe the OBR’s gloomy forecasts hold far too much sway over policy making at the Treasury.
But even they accept that there is no easy way to get around this – particularly given what happened when the former prime minister Liz Truss attempted to deliver her infamous mini-Budget without an accompanying OBR forecast.
It was one of a number of factors – along with sacking the Treasury’s top mandarin and the swift promise of more tax cuts to come – that spooked the markets and ultimately led to the demise of her premiership after just 49 days in office.
Mr Hunt, the man appointed by Ms Truss during her final days in power to clean up the financial mess after his predecessor Kwasi Kwarteng was fired, made a point of emphasising the importance of the OBR and its forecasts.
How will the Chancellor make working people feel they are being rewarded rather than punished by paying ever higher taxes?
“It was right to help families through the pandemic and in the cost of living crisis,” Mr Hunt said. “And the result of that is that we have had a better recovery from the pandemic than many other European countries. And unemployment is historically low at 3.9 per cent.
“But you have to pay down your debts, and that was a lot of money. And I don’t think that should be a permanent change in the burden of tax. As I said before, I strongly believe that the most successful countries are ones which have lower overall tax rates.”
Mr Hunt said that a tax cut funded by borrowing is “not a real tax cut”. He said his Budget would “show people a direction of travel”.
He went on to say that he wants to “be honest with people that when you cut taxes, it has to be for ever”, not cutting taxes by doing magic tricks with the national accounts.
He said: “If you cut taxes by increasing your borrowing, that’s not a real tax cut. And that’s basically a tax cut where you’re sending the bill to future generations and that’s the wrong thing to do.
“The thing about interest rates is they go up and down month by month because of a decision by the Bank of England. But when your taxes change, it’s for ever.
“And that’s why you need an approach that is prudent and responsible and gives people confidence that what you’re doing is making a permanent change.
“But the message I want to give people is that the fundamental divide in British politics, that always has been true and always will be, is that Labour governments spend more and tax more and Conservative governments spend more wisely and tax less.
“And that will be the big dividing line at this election as it has been in every election in my life.”