Hunt planning direct tax cuts to boost economy

Jeremy Hunt is set to offer voters tax cuts which he claims will grow the UK economy in a bid to turn round the polls before the general election.

The Chancellor is weighing up the details of tax cuts in the Budget – as Labour was forced to deny that it is abandoning its key pledge on green investment to avoid an election tax row.

Rishi Sunak repeated a pledge to continue cutting taxes on Friday, saying: “We said that we do want to cut taxes for future events when we can responsibly do so.

“Our priorities are very clear. It is controlling spending and welfare so that we can cut people’s taxes. The plan is working, because we are already doing it – stick with it and there is more to come.”

A senior Conservative MP told i: “They should have a bit more room at the Budget and I’m sure they will spend it all on a retail offer.”

Direct tax cuts for individuals, such as on income tax or national insurance, are seen as the most probable policies to be announced in the Budget in early March.

The Chancellor is expected to argue that cutting taxes can spur economic growth at a time when Britain’s GDP is flatlining. A Treasury source said: “The most competitive economies have the lowest taxes, and we need to make our economy more competitive.”

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Mr Hunt told reporters at the World Economic Forum in Davos this week: “The economies that are growing faster than us – North America, Asian economies – tend to have lower taxes… So that’s the direction of travel we’d like to go in, but it’s too early to know the extent to which we’ll be able to do it.”

Former chancellor Ken Clarke warned that unfunded cuts risked undermining the Conservatives’ reputation for fiscal responsibility, saying: “You won’t just buy votes unless you can demonstrate you’re doing it responsibly, it’s in the national interest and it is going to help the long-term growth of the economy.

“He’s greatly inhibited by the fact we’re in the middle of a serious debt crisis at the moment, running a level of debt which can’t possibly be sustained if you don’t get to a healthy, growing economy, and paying a level of interest on that debt which is an enormous extra burden every year.”

Labour was hit by reports on Friday that it would formally abandon a promise to spend £28bn investing in green infrastructure. The pledge has already been delayed, scaled back and hit with a caveat that it will only happen if the public finances allow it.

A source told The Sun: “We’re going to drop the figure altogether. We’ll keep the promise to turn Britain into a clean energy superpower, but the £28bn has just become an albatross around our neck.” But the party insisted its policy had not changed – a spokesman said: “We are committed to Labour’s Green Prosperity Plan to drive growth and create jobs, including our plan to ramp up to £28bn of annual investment in the second half of the parliament, subject to our fiscal rules.”