Jeremy Hunt has left the door open for more pre-election giveaways after delivering another 2p cut in national insurance in the Budget.
The Chancellor spent around £10 billion on cutting national insurance, described by commentators as a move to “sweeten the Government’s electoral pitch” on top of a similar cut in November.
But speaking after his announcement, Mr Hunt suggested more could be on the way, telling Sky News the Budget was “absolutely not” the last throw of the dice before the election, expected to take place in the autumn.
The prospect of another “fiscal event” before the election may give hope to those Conservative backbenchers who wish the Chancellor had gone further.
They include Suella Braverman, the former home secretary, who told the Commons she would have preferred to see an income tax cut that would help pensioners as well as workers.
But the Chancellor has little room to play with. The Office for Budget Responsibility (OBR) said Wednesday’s announcements left less than £9 billion of headroom against Mr Hunt’s debt target, much of which would be wiped out if the freeze on fuel duty is extended as it has been every year since 2010.
His plans also rely on tight spending restrictions after the election, which commentators have suggested involve spending cuts that departments will struggle to implement.
Questions about what the Chancellor’s plans mean for spending cuts and tax rises after the election could come to the fore on Thursday, when experts from the Institute for Fiscal Studies (IFS) and the Resolution Foundation give their verdicts on the Budget.
Both respected think tanks have already said the Budget leaves the “big picture” largely unchanged, with living standards squeezed and overall taxation going up thanks to more people being dragged into higher tax bands.
Paul Johnson, director of the IFS, said the Chancellor had used “smoke and mirrors”, while the Resolution Foundation’s Torsten Bell said Wednesday’s tax cuts relied on “the prospect of a sour £19 billion of post-election tax rises, and the fiscal fiction that another £19 billion of cuts to public services can be delivered”.
Neither the Conservatives nor Labour have been keen to address the implications of current post-election spending plans, although a Labour spokesman acknowledged the party will face a difficult inheritance if it wins the election.
The party has said it will look at the Government’s plans and “adapt” its own proposals after the Chancellor’s decision to adopt the Labour policy of scrapping non-dom tax status.
On Thursday, the opposition is to focus on the overall picture on tax, saying the Budget meant the average family would be £870 worse off by 2028/29, largely due to tax thresholds being frozen.
Labour said the Chancellor’s plans will only pay back £5 for every extra £10 people pay in tax, while another 3.7 million people face being dragged into paying income tax thanks to the threshold freeze.
Rachel Reeves, the shadow chancellor, said: “It is just a cynical gimmick from a weak Prime Minister who is desperately trying to cling on to power.”
