Hunt plans NI cut, fuel duty freeze and vape tax

Jeremy Hunt
Jeremy Hunt: Budget next week

Jeremy Hunt is expected to cut national insurance rather than income tax in next week’s Budget and introduce a new levy to control vaping.

The Chancellor is under pressure from his backbenchers to cut the tax burden, but new research from the Institute for Fiscal Studies warns that government debt is rising and he will need to consider cuts to public spending.

UK taxes are heading to record-high levels as a share of national income, reducing the Chancellor’s scope for tax cuts, says the think tank, but he is unlikely to take up its suggestion that stamp duty and inheritance tax would be better targets.

A continued freeze on fuel duty and a new “vaping products levy” to be paid on imports and by manufacturers are now more likely.

He is not expected to re-introduce VAT-free shopping for tourists despite calls from retailers, trade groups and airports who say that the UK is losing trade to other destinations.

Campaigners calling for Rishi Sunak’s decision as Chancellor in 2020 to scrap the concession would say the £2.5bn cost of reinstatement would be far outweighed by the benefits of extra spending.

Martin Miklos, a research economist at the institute and author of today’s report, said: “In November’s Autumn Statement, the Chancellor ignored the impacts of higher inflation on public service budgets and instead used additional tax revenues to fund eye-catching tax cuts.

“At next week’s Budget, he might be tempted to try a similar trick, this time banking the higher revenues that come from a larger population while ignoring the additional pressures that a larger population will place on the NHS, local government and other services.

“He might even be tempted to cut back provisional spending plans for the next parliament further to create additional space for tax cuts.

“The Chancellor should resist this temptation. Until the government is willing to provide more detail on its spending plans in a spending review, it should refrain from providing detail on tax cuts.”

Petrol prices September 2023
A freeze on fuel duty is on the cards (pic: Terry Murden / DB Media Services)

Itsreport, funded by the Economic and Social Research Council, argues that tax cuts without tax reform would represent another missed opportunity.

“If the Chancellor is determined to cut taxes and wants to boost growth then better options exist than simply cutting the rates of income tax, National Insurance contributions or inheritance tax,” it says, stating that cuts in other taxes represent a better option.

“Stamp duties on purchases of properties and shares are particularly damaging taxes and should be towards the front of the queue for growth-friendly tax cuts,” it says.

The IFS report comes ahead of a key vote on the Scottish budget today which will usher in tax rises for higher earners, including a new tax band, and deep cuts to the housing and enterprise budgets alongside a council tax freeze.

Scottish Labour finance spokesperson Michael Marra said: “This latest damaging and chaotic SNP budget will devastate public services and fails the people of Scotland.”

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.