The reserve gives the chancellor the chance to achieve “crowd-pleasing” cuts. Photo: REUTERS/Hollie Adams .telegraph.co.uk/5270eb14-0a59-447c-b4ad-956683a09a0c.html?direct=true&id=5270eb14-0a59-447c-b4ad-956683a09a0c' class='tmg-particle audio-player wrp-5270eb14-0a59-447c- b4ad-956683a09a0c' name='Hunt handed over £5bn in tax breaks as borrowing slows' data-business-type='editorial' loading='eager' Scrolling='no' Frameborder='0' style='width: 100%; min-width: 100%; border: none; position: static; display: block; padding: 0px; margin: 0px; height: 32px;'>
Jeremy Hunt has been given an extra £5 billion in potential tax cuts in the Budget after government borrowing fell to its lowest level since before the pandemic.
Cutting interest payments on debt and ending general energy subsidies helped cut the deficit to 7.8 billion pounds last month, official data showed. That was less than half the total for the same month a year earlier and marked the lowest December borrowing figure since 2019.
The Office for National Statistics (ONS) has also revised down its estimate of the borrowing rate for November, i.e. The Treasury has borrowed £119.1 billion this financial year.
The total is £5bn less than the Office for Budget Responsibility (OBR) predicted just two months ago and suggests the Chancellor will have around £20bn to cut taxes, according to Ruth Gregory, deputy leader. Capital Economics economist and former OBR analyst.
Ms Gregory said the tax watchdog was likely to revise its borrowing forecast downward ahead of the Budget on March 6.
Mr Hunt has already hinted at significant tax cuts in the Budget, promising changes to the Budget this week. The UK is on a long-term “path to lower taxes”, with clear hints that it is preparing to cut income tax and national insurance again.
Ms Gregory said £6 billion would likely be spent on freezing fuel duty, which has not been increased since 2011. Other “public-pleasant measures” could be introduced, such as a 1p cut in income tax at a cost of £7 billion a year. «While maintaining a financially prudent appearance,» she added.
Borrowing falls as government tax revenue rises. The taxman is set to receive record amounts from insurance premium tax this year as collapsing NHS services force patients to turn to private care. More than £2 billion was paid out in insurance premium tax in the third quarter of the tax year. By the end of the financial year, revenues could exceed £8 billion.
However, Richard Hughes, head of the OBR, warned the long-term outlook for public finances was poor and said the next government would have to “fundamentally rethink what government does”. Without a fundamental reassessment, the UK will be on a «path to unsustainable debt», he told the House of Lords Economic Affairs Committee.
Asked by colleagues whether the next government would need to review spending in the face of an aging population and rising health costs, Mr Hughes said: «Yes.» He added: “There are a number of other long-term issues. The other obvious option is net zero, where the government has committed to achieving net zero by 2050. I think we have not seen a fully funded plan to achieve this goal.”
Borrowing this fiscal year remains the fourth highest since records began in 1993. Total debt remains close to the overall size of the economy, at 97.7% of GDP in December. The Chancellor needs to achieve debt reduction by the end of the decade to meet self-imposed budget rules.
Laura Trott, chief secretary to the Treasury, said: “Inflation has more than halved. Debt is on track to become a declining share of the economy. And we have been able to afford tax cuts for 27 million working people, as well as £11 billion in tax cuts to boost business investment.»
Ms Trott added: «It is right that we pay these debts in the future.» generations will not have to pay for it.”
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