This is news that may cheer hard-pressed tax-paying entrepreneurs across the UK.
There is a glimmer of hope that Chancellor of the Exchequer Jeremy Hunt may be able to deliver the tax cuts that the hapless Liz Truss couldn’t.
Truss bungled tax cuts
In her chaotic 19 days in power, Truss tried to push through unfunded tax cuts. These threw the markets and currency into chaos, leading to her resignation nearly a year ago.
Now Hunt has found a little bit of wriggle room that could open the way to those elusive tax cuts later this year.
Sweeteners for the voters ahead of elections
The Tories are keen to promise sweeteners to the voters, like tax cuts, ahead of the expected 2024 elections as they attempt to cling onto power.
With a resurgent Labour Party, observers believe the Tories are unlikely to win next year’s polls.
Now Hunt has been presented with an opportunity to consider tax cuts, at the very least, on the back of a smaller-than-expected budget deficit in July.
Net borrowing down.
Net borrowing, excluding state banks, stood at £4.3 billion – less than the £5 billion economists predicted, Reuters reported.
That was almost 14 billion pounds more than the same period last year but 11.3 billion less than forecast by the Office for Budget Responsibility (OBR) whose projections underpin the government’s fiscal plans.
Halve inflation and reduce debt?
“As inflation slows, it’s vital that we don’t alter our course and continue to act responsibly with the public finances,” Hunt said in a statement after the data.
“Only by sticking to our plan will we halve inflation, grow the economy and reduce debt.”
The public finances were boosted by inflows of self-assessed income tax receipts. These receipts are typically strong in July and stood at £11.8 billion – £2.5 billion more than in July last year.”
A fleeting tax cut window?
Borrowing by Britain’s government soared during the COVID-19 pandemic and was pushed up further by last year’s energy price surge. This prompted the government to spend around £40 billion in subsidies for households and businesses.
Hunt may earned a bit of wriggle room around tax cuts. It may be fleeting.
Economists warn that if the economy does tip into recession – through the rises in interest rates – that opportunity for tax cuts may disappear as swiftly as it appeared.
