Tory MPs warn Jeremy Hunt the public need to see tax cuts

Jeremy Hunt was under fresh pressure to cut taxes last night amid falling inflation.

Tory MPs warned that “the public are in need” of personal tax cuts as current levels are “far too high”.

The Government received £77.6 billion in receipts – the highest November total since records began 30 years ago.

The Treasury raked in £18.6 billion of income tax, after millions of workers were dragged into higher bands for the first time.

The Government also received £594 million of inheritance tax and £7.6 billion of corporation tax.

With inflation coming down and hopes for interest rate reductions next year, economists have predicted that the Chancellor could see his headroom roughly double as a result.

This could allow him to cut personal taxes in the spring 2024 Budget, which he is expected to use to set the tone for a general election which could take place later in the spring or autumn.

Former Home Secretary Priti Patel declared: “The public are in need of a cut in levels of personal tax.

“The levels of personal taxation are far too high and as we go into the new year I continue to urge the Government to look again to unfreeze the tax-free allowances and the higher rate allowance.

“By 2028 it will lead to 3million more of the lowest earners paying income tax and 2million more paying the higher rate – that cannot be right and I know the Chancellor will reflect on this and look for future opportunities to unfreeze these tax allowances.”

Sir John Redwood, a former Conservative minister, said the “tax burden is too high

He added: “Inflation is now falling. Tax cuts now are essential for living standards – this isn’t a political issue; we want to show we are the party who can get inflation down and growth up.

“The way to cheer people up is successful deeds – targeted on the economy.”

Analysts estimated the Chancellor has between £10billion and £15billion of headroom

Chancellor Jeremy Hunt has admitted “We would like to bring down the tax burden in a way that is responsible”.

Experts also yesterday predicted another boost for homeowners – with house prices set to soar back to their previous high. And mortgage rates are set to fall further over the coming weeks.

Mr Hunt said: “If debt interest payments go down then potentially that gives me more headroom and I could use that in lots of different ways but I would never use it in a way that would compromise the battle against inflation.

“We would like to bring down the tax burden in a way that is responsible.”

The Chancellor began to ease the historically high tax burden in his November autumn statement by cutting national insurance and announcing savings for businesses, delighting Tory MPs who have long lobbied for tax cuts.

Mr Hunt said there is “still work to do” in bringing down inflation and that it continues to be ministers’ immediate priority.

The Chancellor declined to comment on the outlook for interest rates, but said: “I think people will start feeling more optimistic about their personal finances if they see interest rates on a downward trajectory.”

Mr Hunt has previously expressed concern that unfunded tax cuts could further stoke price rises although those fears now appear to be fading.

The fall in inflation was driven by lower fuel and energy prices and a slowing in the pace of increase in food prices, the ONS said. Core inflation – which strips out the most volatile elements – also saw a significant reduction, despite unusually high wage growth.

Mortgage lenders are also set to slash interest rates as the markets expect the Bank of England to begin cutting the base rate next year.

Following the inflation drop, swap rates – the main pricing mechanism for fixed rate mortgages – have fallen. Swap rates give an indication of where the market thinks the bank rate will be in the future.

The swap rate continued to fall on Thursday hinting further mortgage rates are likely.

Taking into account the fall in markets’ expectations for Bank Rate, the average quoted rate for a two-year fixed-rate mortgage with a 75% LTV ratio will drop to about 4.5% by March—the lowest level since September 2022.

“Things are looking incredibly positive at the moment rate wise,” Chris Sykes, technical director at Private Finance said.

This will benefit millions of mortgage holders. Around 1.5m households will roll onto new deals next year, according to AJ Bell.

Pantheon Macroeconomics said it expects house prices to continue falling in the first quarter of next year.

But easing mortgage rates will then provide the housing market with a boost as prices will increase.

“We still expect prices to rise by over 5% over the final three quarters of 2024, such that they return to their nominal peak at the end of the year,” they said.