Then in the last month’s Autumn Statement, he hacked 2p off National Insurance, in a move that will benefit 27million workers from January 6. It’s amazing how the virtually impossible becomes eminently doable, when there is a general election looming.
We can expect another “impossible” tax cut in the new year, as Hunt and Prime Minister Rishi Sunak desperately battle to recover Conservative Party fortunes and reduce Labour’s towering lead in the polls. The election must be fought by January 2025, but could arrive as soon as May.
As well as tax cuts, other developments may ease the pressure on cash-strapped Britons, as inflation and mortgage rates continue to fall faster than even the most optimistic expected.
Things are finally going to look a little bit brighter in 2024, finally easing the cost-of-living crisis.
In truth, Hunt’s NI cut wasn’t as generous as it seemed. It will only offset a quarter of the tax hikes he and Sunak have rained down on us since 2021, led by their punitive income tax and NI threshold freeze.
When that finally ends in 2028, three million more of the lowest earners will have started paying income tax, while an extra two million will be paying the higher rate.
Pensioners didn’t benefit from the NI cut at all, because they don’t pay it. At least they’ll get an 8.5 percent state pension increase next year April, thanks to the triple lock.
We could all do with a proper tax cut, rather than the Treasury taking our wealth with both hands, then grudgingly lobbing back a couple of pennies.
Hunt may have a bit more scope to do just that, following the sharp drop in inflation over the last couple of months.
Markets reckon there is a 50 percent chance that the Bank of England will cut base rate from today’s 5.25 percent as early as March. By year end, bank rate could be down to 3.75 percent.
Yields on gilts, which the Bank of England issues to fund government spending, have been falling sharply in anticipation.
After peaking at around 4.75 percent in August, 10-year gilt yields have fallen to just 3.5 percent. That’s a drop of more than a quarter.
Falling borrowing costs will boost the economy, ease the pressure on mortgage borrowers and make servicing our £2.6billion national debt a little less onerous.
Yet there is a long way to go.
Public borrowing totalled £14.6billion last month. That’s still the second highest November figure on record, due to higher debt servicing costs and welfare spending.
In May, the UK’s total government debt pile topped 100 percent of national income for the first time since 1961, when we were still knee deep in war debt.
Yet we cannot pay off the debt purely by hiking taxes, as that will only act as a further break on the UK economy. Scotland is likely to learn this the hard way, if the SNP follows through on plans for a huge tax hike. What we need now is growth and a tax cut could help boost sentiment, investment and spending.
READ MORE: Plunging inflation changes EVERYTHING – 2024 just got a lot better
Suddenly Hunt has a little headroom with up to £15billion for giveaways in next year’s Spring Budget.
He is under pressure with Tory MPs saying the public “need” personal tax cuts as current levels are far too high.
The Government received £77.6billion in receipts last month. That’s the highest November total since records began 30 years ago.
Some £18.6billion came from income tax, due to that freeze. The Treasury also received £594million of inheritance tax, putting it on course for a record year.
Hunt will be keen to deliver a good old-fashioned tax cut but may find voters hard to convince. After the multi-pronged assault of recent years, it will be too little, too late. Better than nothing, though.
The good news is that 2024 is set to get better on a number of fronts but after the battering people have been through, I doubt it will be good enough to save the Tories.
