Truss joins Tory writing clamor for immediate tax cuts

Liz Truss is expected to join the Conservative Party’s calls for tax cuts ahead of Jeremy Hunt’s March budget, despite new forecasts warning of slower growth and lower-than-expected tax revenues.

Hunt, Chancellor and Prime Minister is Rishi Sunak Warning to MPs The budget does not plan for tax cuts and the priority is to tackle inflation and bring public finances under control.

But Truss, the former prime minister, and other Tory right-wingers argue that tax cuts will now help generate growth – despite explosion of truce governmentLast September’s debt-funded £45bn tax-cutting mini-budget.

An aide to Truss said, “Liz believes the policy was right but she hasn’t got the political support she needs.” “He’s still convinced that we need to break out of this box of low growth.”

A Truss spokesman said they hoped the former prime minister would break months of political silence ahead of Hunt’s budget.

The Tory right’s insistence that tax cuts are needed in the budget irks Sunak and Hunt, whose strategy is to stabilize the economy and get inflation under control.

Hunt, who will set out a plan for economic growth in a speech on Friday, has told Tory MPs he hopes to offer pre-election tax cuts in the spring 2024 budget, ahead of an expected autumn vote.

“It seems people have a short memory,” said an aide to Hunt, referring to Kwasi Kwarteng’s statement last September. Sunak said last week that people were “not stupid” And could see why taxes could not be cut immediately.

But another former Conservative leader, Ian Duncan Smith, told the Financial Times that Quarantine’s tax cut budget It failed for a number of reasons and there was now no excuse for not cutting taxes from their high post-war levels.

He said markets were already feverish when Kwarteang announced £45bn of cuts and the then-Chancellor had compounded the problem with an overly generous energy support package and undermining of institutions.

Duncan Smith said, “We’re suffocating.” “If you want to decongest the economy, you have to reduce the tax burden on individuals and companies.

“Politically, you can’t wait until next year to cut taxes because that would look cynical.” Duncan Smith said he believed Hunt would find room for tax cuts and was managing expectations.

Conservative-supporting newspapers including the Daily Mail and Daily Telegraph are also clamoring for immediate tax cuts and many Tory MPs agree. “What’s the alternative – take the economy off a cliff?” one asked.

With the government now determined to listen to the independent Office for Budget Responsibility, insiders confirmed the fiscal watchdog sent its first round of economic forecasts to the Treasury last week.

First reported in The Times, these show a small downgrade in medium-term growth forecasts, which would lead to lower tax revenues and less room for maneuver on taxes in the run-up to the 2024 election.

The FT has learned that the first iteration of the forecast includes a reduction in the forecast growth rate to 0.2 per cent in 2027-28. The OBR now thinks that the size of the UK economy that year will be 0.5 per cent smaller than the Autumn Statement forecast.

If these changes are confirmed by the OBR in the March budget, they would represent a smaller revision than the 3 per cent downgrade of the fiscal watchdog forecast last year.

Treasury officials have warned that lower wholesale gas prices are unlikely to provide a large war chest for tax cuts.

With interest rate projections still high, the annual cost of government debt may not have come down much. Officials are also expecting less revenue from oil and gas taxation as well as windfall taxes as profits from North Sea fields shrink.

Internal government projections suggest oil and gas revenues could fall by more than £10bn at current prices in 2023-24, although the impact on public finances in the medium term would be much smaller.

Offsetting these effects, which will be an increase in public borrowing and debt, this year’s official figures for public finances are better than expected, despite the government Borrow A record £27.4 billion in December.

The OBR said on Tuesday that once timing effects and one-off adjustments for student loans were accounted for, underlying public borrowing in 2022-23 was running £11.3bn less than expected.

The surprisingly strong public finance figures, it said, were “broadly based on central government receipts and spending as well as borrowing by both local authorities and public corporations”.

On Wednesday, the Office for National Statistics reported that Britain’s producer price inflation eased to its lowest rate in almost a year in December as cost pressures eased.

Manufacturer input prices – prices paid by businesses for materials and other goods – rose at an annual rate of 16.5 percent in December, down from 18.0 percent in November.

Additional reporting by Valentina Romi in London