Tax cuts to be saved for spring as Hunt preps ‘dour’ autumn statement
The autumn statement is unlikely to feature any big ticket tax cuts despite the UK’s finances being in a slightly better position than expected, experts have predicted.
Recent government borrowing figures have come in lower than official forecasts, catalysing calls from Tory MPs for a spree of tax cuts to stimulate the UK’s flagging economy.
Thanks to the impact of inflation the Chancellor is likely to have headroom of around £13bn, according to analysis by the Resolution Foundation.
This would give the Chancellor the space to announce tax cuts while still meeting his golden rule of getting debt falling as a percentage of GDP in the fifth and final year of the Office for Budgetary Responsibility’s forecasts.
However, tax experts were not convinced that Hunt would pursue attention grabbing tax cuts on 22 November. Tim Sarson, KPMG UK head of tax policy, expects the autumn statement to be a “dour affair”.
Despite the undershoot on borrowing, Sarson said “the money tree is looking distinctly bare… we think vote pleasing tax cuts will be saved for the spring, and that the autumn statement will be largely focused on business”.
Colin Graham, head of tax policy at PwC, agreed that “blockbuster tax changes are seemingly off the table”.
Graham agreed that Hunt’s focus would be primarily on businesses. “The most regular feedback business is the need for consistency and a stable platform to facilitate investment,” he said.
“In that context, a tax roadmap to stimulate growth and long term investment would be welcome”.
Although measures to support business are likely to take centre stage, a number of experts suggested the Chancellor could introduce some reforms to inheritance tax.
Recent reports have suggested that Hunt’s headroom is likely to evaporate next year as growth slows, meaning he has a small window of opportunity in which to cut taxes while still meeting his fiscal targets.
Changes to inheritance tax (IHT) are also less likely to be as inflationary as reductions to the rate of income tax, which makes them more attractive to the government.
Sian Steele, head of tax at Evelyn Partners, said “a move on IHT would generate some positive publicity, please many Tory backbenchers and possibly win back some wavering voters – all at relatively little expense to the Treasury, with total IHT receipts for 2022/23 coming to about £7.1bn”.