The chancellor says the cost of public debt has left him with some “very difficult decisions”.
Image source, ReutersChancellor Jeremy Hunt has said it will be “virtually impossible” to deliver tax cuts until the UK economy improves.
A less gloomy economic outlook and the high cost of living had led to calls for measures to reduce taxes in the Autumn Statement in November.
Speaking on LBC, Mr Hunt said the country’s high levels of debt left him with some “very difficult decisions”.
The UK’s debt currently stands at 98.8% of GDP, a level not seen since the early 1960s.
With the Conservatives well behind Labour in the opinion polls, a debate is playing out about what, if anything, the party can do to win back ground before a general election, expected as soon as next May.
A significant number of Conservative MPs argue that keeping taxes at historically high levels, particularly given the high cost of living, is a political mistake.
They want ministers to cut tax – or at least set out a path to doing so.
A slight fall in inflation – the rate prices are rising – last month also meant the Bank of England kept interest rates at 5.25% after two years of incremental rises, meaning the cost of national borrowing did not increase as some had expected.
But speaking on the Tonight With Andrew Marr programme, Mr Hunt said that the cost of servicing the country’s debt remained higher that it was when he delivered the Spring Budget in March, meaning there was no “extra headroom” for tax cuts.
“It makes life extremely difficult,” he said. “It makes tax cuts virtually impossible, and it means that I will have another set of frankly very difficult decisions.
“All I would say is, if we do want those long-term debt costs to come down, then we need to really stick to this plan to get inflation down, get interest rates down.
“I don’t know when that’s going to happen. But I don’t think it’s going to happen before the Autumn Statement on 22 November, alas.”
It is not surprising that tax cuts are not being considered right now – government insiders have been saying that for months.
But the Treasury is preparing voters for another fiscal event where significant commitments are unlikely – as ministers continue to prioritise reducing inflation further.
Figures released on Wednesday showed that inflation in August stood at 6.7%, lower than many had feared but still significantly higher than the target level of 2%.
Tax cuts typically increase demand in the economy and could risk fuelling price rises back up towards levels seen earlier this year.
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