Jeremy Hunt is urged to stick with plans for substantial tax cuts to ... trends now

Jeremy Hunt is urged to stick with plans for substantial tax cuts to ... trends now
Jeremy Hunt is urged to stick with plans for substantial tax cuts to ... trends now

Jeremy Hunt is urged to stick with plans for substantial tax cuts to ... trends now

Jeremy Hunt was last night urged not to scale back plans for substantial tax cuts despite a double economic blow.

The Chancellor was under pressure to get the economy back on track with his spring budget after the UK slipped into a recession and the 'headroom' for cuts halved. 

Grim figures showed the economy shrank by a worse-than-expected 0.3 per cent in the final three months of 2023.

Britain met the technical definition of a recession – two straight quarters of contraction – because output also fell 0.1 per cent between July and September.

That news came after the Treasury was handed official estimates that showed just £13billion of wiggle room for tax cuts, down from £24billion at the start of the year.

The Chancellor (pictured) was under pressure to get the economy back on track with his spring budget after the UK slipped into a recession and the 'headroom' for cuts halved

The Chancellor (pictured) was under pressure to get the economy back on track with his spring budget after the UK slipped into a recession and the 'headroom' for cuts halved

While experts said the recession would be short and shallow ¿ with growth expected in the first quarter of this year ¿ Mr Hunt (pictured) is under pressure to take urgent action, with the country labelled a 'stagnation nation'

While experts said the recession would be short and shallow – with growth expected in the first quarter of this year – Mr Hunt (pictured) is under pressure to take urgent action, with the country labelled a 'stagnation nation'

While experts said the recession would be short and shallow – with growth expected in the first quarter of this year – Mr Hunt is under pressure to take urgent action, with the country labelled a 'stagnation nation'.

The estimates from the Office for Budget Responsibility have left him looking at a public spending squeeze in order to find an extra £5-6billion and provide some relief to families and businesses in his crucial pre-election budget on March 6, less than three weeks away.

Struggling households already face the biggest tax burden since the Second World War, while borrowing costs have reached a 16-year high.

Norman Lamont, a peer and Tory former chancellor, said he thought there was room for tax cuts.

'There is probably some headroom that has been created by very strong growth in tax revenues, particularly as a result of the freezing of the tax thresholds for such a long period,' he told the BBC.

'Looking longer term though, any tax cuts have to be matched by tight control on public spending, probably financed by reductions in public spending.

'People ought to be realistic about this. We have an almost perfect storm. We are coming through it, I think there is light at the end of the tunnel now and we just need to hold our nerve.'

Tory former business secretary Sir Jacob Rees-Mogg said: 'The economy clearly needs a boost and this should come in the form of lower interest rates and tax cuts. 

To pay for this the state needs to do less and encourage the record number of economically inactive people back into work.'

There were also calls for the Bank of England to make borrowing cheaper.

'The case for early rate cuts is now even stronger,' said Julian Jessop of the Institute of Economics Affairs think tank. 'It is important that the Chancellor avoids doing anything that might reignite inflation and encourage the Bank to keep rates higher for longer.

'But there is room for some well-targeted tax cuts that would both support demand and boost the productive potential of the economy.'

A Treasury (pictured above) source cautioned that the space for tax cuts at the budget would be more limited than at the autumn statement, which came with a 2p cut in National Insurance

A Treasury (pictured above) source cautioned that the space for tax cuts at the budget would be more limited than at the autumn statement, which came with a 2p cut in National Insurance

Mr Hunt yesterday hinted that tax cuts were on the way, saying there was light at the end of the tunnel and countries with lighter taxes tended to grow faster.

But a Treasury source cautioned that the

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