Jeremy Hunt is reportedly considering billions of pounds in spending cuts to fund tax cuts in the upcoming spring budget, according to the Financial Times. The chancellor is exploring further spending restraint after 2025 if economic forecasts do not provide enough headroom for tax reductions.
Treasury officials are looking at reducing the projected rise in public spending from 2025 to about 0.75% per year, which could free up £5bn to £6bn for tax cuts. Economists warn that even the current plan for a 1% real-terms increase is unrealistic and would require cuts to stretched public services.
The cuts would likely target unprotected departments such as adult social care and the Ministry of Justice, while NHS and schools spending would remain protected. Torsten Bell of the Resolution Foundation has described Hunt's previous giveaways as relying on 'implausible austerity'.
Labour believes the cuts are a political trap, allowing the Tories to challenge them on whether they would implement the cuts or increase spending. If Labour opts for higher spending, the Tories could accuse them of planning a 'tax bombshell'.
A Treasury insider told the FT that the chancellor may not have as much space for tax cuts as in the autumn, prompting internal discussions on further spending restraint and productivity gains. Hunt's decision will depend on the fiscal headroom provided by the Office for Budget Responsibility, whose latest forecasts were handed to the Treasury on Wednesday.
