British Chancellor Jeremy Hunt Facing Scrutiny Over Planned Tax Cuts Ahead of Budget

British Chancellor Jeremy Hunt is purportedly planning lower taxes ahead of the region's Budget and general election, prompting criticism from a leading think tank.

The think tank said that the British government should not cut taxes in the upcoming Budget unless officials are able to spell out how it would afford them. The chancellor has suggested that he would like to have tax cuts in what could be the last Budget before the region's general election.

Britain's Planned Tax Cuts

However, the Institute for Fiscal Studies (IFS) said that the case for tax cuts is "weak," adding that the government said it would not comment on whether or not further tax cuts would be "affordable in the Budget."

Both Hunt and British Prime Minister Rishi Sunak have publicly hinted at their desire to reduce the taxation burden on the general public. Last month, Hunt suggested that he was looking at trimming public spending to deliver tax cuts, as per BBC.

The IFS argued that the chancellor should not move forward with the alleged plans without providing specific details of where the axe would actually fall. The think tank said that any tax cuts should be delayed until Hunt is able to do a detailed spending review.

The deputy director of the IFS, Carl Emmerson, said that they do not believe tax cuts should be implemented right now, noting that they could be paid for by uncertain spending cuts that the government might never deliver.

The think tank also said that taxes in the region were heading to record-high levels when measured against the size of the overall economy. However, the local government's debt has also been high and continues to rise and is barely on course to fall in five years.

Effects on the Economy

The situation comes as Sunak's raid on workers and businesses will most likely cost the nation an additional $127 billion in taxes by the end of this decade. According to the Telegraph, this is as surging net migration piles more pressure on public services across the region.

The think tank noted that Britain's tax burden would rise by 2030 as frozen tax thresholds result in inflation, pushing people into higher brackets and putting corporation tax burdens on businesses. This means the tax burden is expected to increase even after tax cuts in the Autumn Statement.

Hunt's planned tax cuts would focus on national insurance as well as a vape tax instead of on income tax. This year, Britain will have to pay an additional $84 billion compared to a theoretical scenario where public finances remained on their pre-COVID path.

The chancellor's supposed plans come as he is expected to offer some pre-election sweeteners as part of efforts to close the gap with the Labour Party. Large cuts to income tax could add further impetus for the Bank of England to keep interest rates on hold for a little bit longer, which means that borrowers will suffer more and there will be delays to rate cuts, said The Guardian.