4 mins read

The budget: what Jeremy Hunt needs to do – and the pitfalls he must avoid

Ben Zaranko

Senior research economist,
Institute for Fiscal Studies

What should the chancellor do If he’s absolutely determined to cut taxes, Jeremy Hunt should focus on changes that improve the UK’s growth prospects. Rather than cut headline rates of income tax or national insurance, he’d get more bang for his buck if he cut or scrapped stamp duties on house and share purchases instead.

What he should not do The key thing the chancellor should avoid is writing another chapter of his fiscal fiction. He should avoid the temptation to pencil in additional unspecified spending cuts in the next parliament (cuts that, in all likelihood, won’t be deliverable without some quite radical cuts to what the state is expected to deliver) in order to “pay for” definite tax cuts today.

Tom Clougherty

Executive director,
Institute of Economic Affair

Should Given fiscal headroom, the chancellor should prioritise reforms that will have a lasting economic impact over pre-election giveaways. Some technical changes to corporation tax and business rates would help, but abolishing distortionary and destructive stamp duties – or cutting them as much as possible – should top the wish list.

Should not Hunt should not hand his successor a budgetary black hole. Keeping public spending flat in real, per capita terms is fine – but it must be accompanied by reform. Starving public services of resources while doing nothing to make them more productive is a key failure of the last decade.

James Smith

Research director,
Resolution Foundation

Should The chancellor should show he’s not all about short-term giveaways by addressing the “fiscal fictions” in his post-election spending plans. He should announce a one-year spending review before the summer so government departments don’t go through an election without knowing the budgets for public services just a few months ahead. If he is going to cut taxes, it should improve the tax system – abolishing the high-income child benefit charge that leaves parents with high tax rates – and not raising stamp duty next year.

Should not He shouldn’t double down on post-election spending cuts by pencilling in even larger reductions and blowing all his wriggle room on tax cuts. Expensive and poorly targeted income tax cuts and wasteful inheritance tax cuts should be avoided. Cutting national insurance is better targeted at workers and can be used to reduce some of the biggest distortions in the tax system.

Katie Schmuecker

Principal policy adviser,
Joseph Rowntree Foundation

Should He should deliver lasting solutions that address the rise in deep poverty spanning two decades. We must build a system that’s there for all of us when we fall on hard times. Universal credit needs an “essentials guarantee” so that, at a minimum, people can always afford life’s essentials.

Should not: The chancellor shouldn’t assume the cost of living crisis is over. Millions are going without essentials, and support is coming to an end. It’s vital the household support fund (HSF) isn’t scrapped so that councils and devolved administrations can avoid scaling back cash payments and support for people in crisis.

Mark Littlewood

Director, Popular Conservatism (PopCon)

Should Exercise some meaningful spending constraint to pave the way for the tax cuts he yearns for but appears incapable of delivering. Instead of highlighting one or two tiny tax cuts which are trumped by less transparent tax rises, he should commit to an overall reduction in the tax burden.

Should not He shouldn’t praise the Office for Budget Responsibility’s [OBR] “amazing work” or be bound by its forecasts, which tend to be out by £500m a year or more. The OBR’s chair, Richard Hughes, appears to have more control over fiscal policy than the government itself. Some meaningful effort need to be made to wrestle this back.