Government borrowing fell to £7.8 billion in December 2023 giving Chancellor Jeremy Hunt more scope to make the tax cuts he has hinted at in the Spring Budget.
The Office for National Statistics (ONS) data revealed that government borrowing for last December was around half of that borrowed in December 2022.
It also showed that interest payable on government debt fell to £4 billion in December 2023, down by £14.1 billion when compared to December 2022.
During the World Economic Forum’s annual meeting in Davos, Switzerland, Mr Hunt hinted that he wants to cut taxes
The Chancellor said:
‘In terms of the direction of travel we look around the world and we note that the economies growing faster than us in North America and Asia tend to have lower taxes, and I believe fundamentally that low-tax economies are more dynamic, more competitive and generate more money for public services like the NHS.
‘That’s the direction of travel we would like to go in but it is too early to say what we are going to do.’
The Chancellor will present the Spring Budget on Wednesday 6 March 2024.
Tax cut promises may need to be scrapped as a result of the UK being in an ‘unfortunate economic and fiscal bind’, the Institute for Fiscal Studies (IFS) has warned.
The next government is likely to face some of the most difficult economic and fiscal choices the UK has faced outside of pandemics, conflicts and financial crises, according to an IFS report.
The IFS said that a combination of high debt interest payments and low expected growth is forecast to make it more difficult to reduce debt as a fraction of national income than in any parliament since at least the 1950s.
The think tank also warned that whilst tax rises and cuts for public services are built into current government plans, public services are ‘showing signs of strain‘ and are ‘performing less well than they were in 2010’.
IFS Director Paul Johnson said:
‘Now more than ever, as a country, we face some big decisions and trade-offs over what we want the state to do and how we’re going to pay for it. Those looking to form the next government should be honest about these trade-offs.
‘If they are promising tax cuts, let’s hear where the spending cuts will fall. If they are going to raise, or even protect, spending, they should tell us where taxes will rise. Or parties might think that further increases in government debt are justified: in which case they should make the argument for why debt should be rising.
‘If to govern is to choose, then to campaign should be to present clear choices and trade-offs to the electorate. If the parties don’t do that clearly and honestly over the next year, we at IFS will do what we can to plug that gap.’
Internet links: IFS website
The tax loophole that allows drivers of pick-up trucks to save thousands of pounds each year is set to be closed. From July, pick-up trucks such as the Ford Ranger and Nissan Navara will be reclassified as cars rather than vans, eliminating the significant benefit-in-kind (BIK) tax breaks they currently enjoy. Currently, pick-ups weighing over one tonne are classified as commercial vehicles, resulting in lower tax rates. However, under the planned changes, pick-ups will lose their commercial status and be classified as cars. This means that tax will be calculated based on the cost and carbon dioxide emissions of the vehicle, resulting in much higher charges for gas-guzzling pick-ups meaning that the increased costs for affected businesses would be significant. The changes come after a court case brought against HM Revenue & Customs by Coca-Cola, which claimed that certain pick-up trucks should be taxed as commercial vehicles for BIK purposes. The Court of Appeal ruled in favour of HMRC’s decision to tax the vehicles as private cars, leading to the rule change.