According to the FT, the Chancellor is considering “further spending restraint” after 2025, if forecasts from the Official Budget for Responsibility say there is no room for “smart tax cuts”.
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On 14 February, the OBR handed Hunt its forecast for how much fiscal headroom he will have for the upcoming Budget, which is likely to determine his decision regarding public spending plans.
UK borrowing costs have risen recently, despite hopes of rate cuts this year, leaving Hunt with less capacity for cuts than might have been anticipated at the start of 2024.
The Treasury believes he will have £8bn in headroom for the upcoming Budget, compared with £13bn in last year’s Autumn Statement.
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Treasury officials were looking at reducing public spending rises by about 0.75% a year to provide £5bn to £6bn for Budget tax cuts.
A Treasury insider speaking to the FT said: “It does not look like the Chancellor will have as much space for tax cuts compared to last autumn, so senior folk internally are starting to look at further spending restraint and productivity gains in the future if the numbers move against us again.
“It is a tough call, but it is not clear whether there will be easier alternatives.”
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