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Jeremy Hunt Wrestles With Major Tax Compromise Ahead Of Spring Budget

Chancellor of the Exchequor Jeremy Hunt (Alamy)

2 min read

Chancellor Jeremy Hunt faces the major decision of whether to cut National Insurance or income tax at the Spring Budget as he hopes to regain favour with voters and restless MPs.

The government has repeatedly indicated that it will announce further tax cuts at next week's fiscal event to bolster the mood among Conservative MPs who believe that doing so will give their party a fighting chance of mitigating defeat at the next general election, due to be called this year.

At the Autumn Statement, Hunt reduced the main rate of National Insurance contributions from 12 per cent to 10 per cent. Tory MPs generally welcomed the move at the time, but warned that they wanted to see further tax cuts at the 6 March announcement.

In recent weeks, Government figures have stressed that the state of the economy heading into next week's announcement leaves the Treasury with a more limited scope for tax cuts than previously hoped. It was confirmed earlier this month that the UK entered a recession.

Tory MPs who are hungry for tax cuts want to see Hunt and Prime Minister Rishi Sunak reduce income tax, believing that it will be a more attractive step with voters who they are running out of time to win back. 

The Tories have trailed Keir Starmer's Labour Party by large, double-digit leads in the opinion polls for over a year. 

However, Conservative backbenchers fear that the pair will take a more cautious approach by announcing a further cut to National Insurance. 

Ahead of next week's Budget, 42 Conservative MPs have written to Hunt urging the government to reduce VAT and reform business rates for the hospitality sector.

In the letter sent to Hunt on Tuesday, the MPs, who include senior Tories like former Cabinet minister Therese Coffey and Stephen Crabb, said the industry had faced “sustained pressures” in recent years as a result of the coronavirus pandemic and ongoing cost of living challenges, and needed further support from ministers.

Conservative MP for East Devon Simon Jupp, who chairs the All-Party Parliamentary Group for Hospitality and Tourism, told PoliticsHome:  “As Chair of the cross-party group in Parliament for hospitality and tourism, and MP for East Devon – home to many of brilliant hospitality and tourism businesses – I want the government to continue its record of industry support by taking the actions set out in my letter to the Chancellor.

“Backed by over 40 colleagues, these steps would provide businesses with the certainty they deserve in the years to come.”

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