Jeremy Hunt told on Thursday how he had laid out “clear” economic dividing lines for a General Election which could come as soon as May.
The day after his Autumn Statement, the Chancellor argued that his measures were aimed at improving the “long-term competitiveness of the British economy” rather than being short-term “crowd pleasers”.
Mr Hunt trumpeted 110 growth measures and made permanent a “full expensing” system for businesses, which allows firms to deduct spending on plant, machinery and IT equipment from profits.
The tax break means that for every £1 spent on qualifying investment a firm can cut their tax bill by up to 25p and is estimated to be worth almost £11 billion to businesses in 2028-29.
The Chancellor also cut the 12 per cent National Insurance (NI) rate on earnings between £12,570 and £50,270 to ten per cent.
He said the two percentage point reduction in the main rate of employees’ NI will save someone earning £35,000 more than £450 and the change would benefit 27 million people.
However, the overall tax burden is rising over coming years, though not quite as steeply as before, meaning that any gains from NI cuts will be swiftly overtaken by losses to taxpayers due to the threshold freezes on a number of personal taxes, including income tax, set to eventually rake in more than £40 billion a year.
With a General Election expected next year, the NI tax cut will be rushed through Parliament to take effect in January, rather than as it normally would in April.
Mr Hunt told GB News that he had “no idea” when the next election would be.
However, he added: “But when it comes to elections, people do vote Conservative because they think that we are going to take the right decisions for the long term of the economy.
“Yesterday, we saw a very clear dividing line.
“We believe in supply side measures that boost the competiveness of firms, companies, businesses, operating in Britain, that’s the only long-term way to raise salaries and raise living standards.
“Labour believe in demand supply measures, they want to increase borrowing by £28 billion a year.
“We think that gives you a short-term boost but in the long run that raises debt, that raises the debt interest that we have to pay through our taxes.
“Interest rates are higher and taxes are higher.
“So it’s a very different approach and I think that will be clear at the next election whenever we have that.”
Mr Hunt, though, also had to defend the tax burden heading toward a 70-year high, despite the Autumn Statement tax cuts, and high debt mountain and debt interest payments, which he stressed had built up to plough hundreds of billions into supporting the country during the Covid pandemic, and as well as to respond to the impact of Putin’s Ukraine war.
Asked on Times Radio if she felt a May election was around the corner, shadow Chancellor Rachel Reeves said: “There is going to be an election at some point in the next year.
“I say bring it on.”
She added: “Low and stable inflation, predictable interest rates are incredibly important for people being able to realise their dreams.
“We haven’t had that under the Conservatives. The last few years, we have had absolute chaos on economic policy-making and it’s family finances that have paid the price.
“That election, and the change that we need to see in Britain, can’t come soon enough.”
The decision to bring forward the NI cut to January triggered a fresh wave of speculation that Rishi Sunak could be preparing for a possible May General Election.
Labour is working on the basis of a spring election and there are reports that the Prime Minister is getting an election team in place for the New Year.
However, if the Tories continue to trail Labour in the polls by 15 to 20 points, Mr Sunak is expected to wait until the autumn before seeking re-election.
The Chancellor said he had not spoken to the Prime Minister about the prospect of a May election.
Mr Hunt on Wednesday also cut national insurance by an average £350 a year for around two million self-employed people from April.
But the continuing freeze in personal tax thresholds will wipe out the benefit of the NI reductions for many workers, as higher earnings see millions dragged into paying more to the Exchequer.
The decision to keep in place the freeze, rather than uprating them to account for rising inflation, will result in almost £45 billion of extra revenue for the Exchequer by 2028-29 as a result of “fiscal drag”.
The Office for Budget Responsibility (OBR) said that between 2022 and 2029 more than four million extra individuals will be earning above £12,750, leaving them liable for income tax.
Three million more will move into the 40 per cent higher rate band and 400,000 more into the top 45% rate for those earning above £125,140, the OBR estimated.
