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Jeremy Hunt has hinted that tax cuts are unlikely to be on offer before the next general election after warning that inflation had proved “stickier than was forecast”.
The Chancellor told Bloomberg that he did not expect to have more fiscal headroom at the Autumn Statement — compared with the spring Budget — and “debt interest payments are higher”.
Speaking to Bloomberg TV, Hunt said: “I think it’s unlikely because since the spring Budget, when the last numbers were published, we’ve seen inflation stickier than was forecast at the time and that means debt interest payments are higher.
“But we don’t have the numbers yet from the Office for Budget Responsibility [OBR] so this is speculation for you and me both.”
His comments come in the wake of reports that the Treasury is considering squeezing benefits in an attempt to pay for tax cuts in a boon to voters — set to spark a Tory row.
In a suggestion that tax cuts were unlikely, he added: “But our priority is bringing down inflation and when you’re trying to bring down inflation you have to be really careful not to pump extra money into the economy; much as you would like to, not to pump extra money into people’s pockets because that can push up prices and keep inflation higher for longer.
“The one thing I can absolutely say is that our focus at the Autumn Statement will be on bringing down inflation and delivering both the Prime Minister’s goal to halve inflation and the Bank of England’s target to bring it down to two per cent.”
Hunt also praised the Bank for being one of the first central banks globally to raise interest rates, saying: “In fairness to the bank, lots of central banks around the world underestimated the persistence of inflation.
“We brought inflation down from over 11 per cent to 6.8 per cent so we are making progress… but the long-term future of the economy depends on getting inflation down.”
Commenting on the prospects of a UK-India trade deal, the Chancellor said both sides were keen to “unlock more ability” for investment and cited a “real political momentum”. A deal could be done by the end of 2023, he said, but the next few weeks were critical.
He told Bloomberg that existing “significant” investment flows could be increased, and that pension funds and insurance asset managers in the Square Mile wanted to invest “trillions” in high-growth sectors domestically or overseas.
India’s plans for GIFT City (Gujarat International Finance Tec-City) and “India’s Silicon Valley” in Bangalore were key collaboration opportunities for the UK, Hunt added.