Jeremy Hunt is being urged to cut taxes as soon as possible
Jeremy Hunt is being urged to cut tax as soon as possible to help people struggling with the cost-of-living crisis. The call by Tory MPs came as it was revealed that he raked in 10 percent more tax last year.
Economists say the Chancellor now has plenty of “wiggle room” to cut the highest tax burden on record as official figures also showed government borrowing was £13.2billion less than expected last year.
Ex-Cabinet minister John Redwood said: “Cut taxes now. We cannot afford high tax rates which cut growth and depress revenue.”
The Treasury collected £786.6 billion in tax in the last financial year – 9.9 percent more than the year before.
And government borrowing – the difference between spending and tax income – reached £139.2billion over the past 12 months.
This was lower than the £152.4billion predicted by the Office for Budget Responsibility last month, meaning an extra £13.2billion could be used to help ease the tax burden.
The call by Tory MPs came as it was revealed that he raked in 10 percent more than us last year.
Ex-Cabinet minister John Redwood
The lower than expected borrowing was despite the government spending over £40billion on helping with rocketing energy bills.
The significant boost to Treasury coffers raised hopes tax cuts will be considered in the Autumn budget.
Mr Redwood called on the Government to slash business taxes to drive economic growth which is struggling to reignite after the pandemic and energy crisis.
“The UK needs to go for growth, which is the best way to raise more money for public services,” he said.
“Ireland, with half our business tax rate, collects far more business tax proportionately.
“The Celtic Tiger is roaring again and so should our economy.”
His views were echoed by former Business Secretary Jacob Rees-Mogg – who attacked the Office for Budget Responsibility’s gloomy predictions.
“The failure of the OBR’s forecasts just a few weeks after they were made is damaging the economy,” he said.
“Taxes are higher than they need to be, stifling growth because of incompetent forecasters”.
Tory MP David Simmonds added: “The Government is showing real progress in balancing the books.
“We need to get back to cutting taxes so people keep the money they earn as soon as possible.”
Economist Ruth Gregory, at Capital Economics, said the lower-than-expected borrowing gave Mr Hunt “more wiggle room to cut taxes or raise spending ahead of the next general election”.
With the election expected next year, she “wouldn’t be at all surprised” to see giveaways in the Autumn Statement.
Demands for tax cuts have been mounting since Rishi Sunak took over from Liz Truss in October.
Although his first task as PM was to steady the ship following the financial turmoil surrounding his predecessor’s short-lived tenure of No10, MPs now want him to release the handbrake.
Mr Redwood added: “It’s got to happen sooner rather than later.”
Julian Jessop, of free market think-tank the Institute of Economic Affairs, said: “The public finances data is, once again, not as bad as feared.
“Borrowing in the year ending in March has come in at £13.2billion below the forecast from the Office for Budget Responsibility. This suggests the Chancellor has more headroom for pre-election tax cuts and other sweeteners.”
Despite the optimistic outlook, public borrowing remains high.
The Office for National Statistics said the government borrowed £21.5billion in March alone, the second-highest March figure since monthly records began in 1993.
Energy bill support means borrowing has ballooned since it was put in place in October to help people cope with rocketing bills after Russia’s invasion of Ukraine.
Mr Hunt announced in last month’s Budget that the energy price guarantee capping bills at £2,500 a year will be extended for households for another three months, from April to June.
Reacting to the latest data, he said: “These numbers reflect the inevitable consequences of borrowing eye-watering sums to help families and businesses through a pandemic and [Vladimir] Putin’s energy crisis. We were right to do so because we have managed to keep unemployment at a near-record low and provided the average family more than £3,000 in support this year and last.”
However, he added that the government had a “clear plan to get debt falling”.
Official figures also showed Britain’s debt mountain stood at £2.5 trillion at the end of March. That is around 99.6 percent of gross domestic product, a ratio not seen since the early 1960s.
The past financial year has also seen two of the highest months for interest payments on government debt ever recorded. Debt interest payments stood at £3.9billion in March, £400million higher year-on-year, though far less than the £20billion seen last June as inflation has been easing back from last year’s painful highs.
It comes as new HMRC figures reveal stealth tax rises have netted a record £786.6billion.
Two of the biggest contributors were capital gains tax and inheritance tax. Capital gains tax pulled in £2.8 billion more than last year, up 18 percent and an increase of 90 percent over the past four years.
Inheritance tax receipts rose to £7.1billion, a hike of £1billion since the same time last year.
Capital gains tax receipts have increased as people decide to sell their homes before Labor has a chance at winning the next election, fearing they will increase it.
Previously seen as a tax on the wealthy, capital gains is often viewed now as a mainstream tax on the average family, as house prices continue to increase.
The tax-free allowance has been slashed to £6,000, meaning the government will be raking in far more in the coming year.
Income tax has hit a new high, adding £26billion more to the bill from last year and taking the total paid to £246.8billion.
The temporary increase in national insurance for the past year also led to a tax hike, with another £18billion in government coffers.
Helen Morrissey, of investment firm Hargreaves Lansdown, said: “Our tax burden is growing as a series of threshold freezes and cuts kick in. We’ve seen receipts on the rise, and recent cuts to capital gains tax thresholds will further boost future receipts.”