UK Chancellor of the Exchequer Jeremy Hunt will offer voters a dollop of optimism alongside well-flagged spending restraint in his spring Budget as he tries to curb inflation, one of his junior ministers said.
(Bloomberg) — UK Chancellor of the Exchequer Jeremy Hunt will offer voters a dollop of optimism alongside well-flagged spending restraint in his spring Budget as he tries to curb inflation, one of his junior ministers said.
Hunt has spent months trying to downplay expectations of any major Treasury largess when he delivers the UK’s annual tax-and-spending plans on March 15, arguing his priority is to clamp down on double-digit inflation. But in an interview, Treasury minister Victoria Atkins signaled the set piece won’t be entirely gloomy.
“The messages of fiscal responsibility will absolutely continue through budget and beyond but also that critical message of hope,” Atkins said in an interview.
Hunt faces growing pressure to loosen the purse strings because of recent improvements to the UK’s public finances. Conservative MPs and the business community are calling for tax cuts and extra spending in light of healthier tax receipts and lower energy prices — which reduce the level of assistance the government must pay out to households and companies.
Economists say Britain’s economic prospects have improved enough to hand Hunt an extra £10 billion ($12 billion) compared to official forecasts in November.
But Hunt has stuck to his mantra that he doesn’t want to risk stoking rising prices. A surprise budget surplus in January doesn’t represent a “recurrent” improvement in the national finances, he has said while also pushing back against the idea that lower energy prices have led to a windfall for the Treasury.
Britain’s finance ministry is also wary that further hikes to interest rates could blow Hunt off course for meeting his fiscal rule of having debt falling in 2027-28. A 0.4% increase in interest rates would erode the £9.2 billion headroom he currently enjoys in his pursuit of that goal, a person familiar with Hunt’s thinking said, adding that the chancellor has limited room for maneuver.
Nevertheless, Hunt faces calls from businesses and lawmakers for giveaways including:
- A fuel duty freeze costing £6 billion
- Sweetened pay deals for public sector workers to end months of damaging strikes
- Extra help for households on power and gas bills by keeping the government’s energy price guarantee at £2,500, instead of raising it to £3,000 as planned in April
- Delaying or scrapping a planned increase in corporation tax to 25% from 19%
- More tax reliefs to encourage business investment, given the expiration of Sunak’s flagship “super-deduction” tax break
Atkins declined to comment on whether Hunt’s budget would include specific measures to stoke investment, but she said Sunak’s breakthrough deal with the European Union over Northern Ireland shows the UK is focused on its international reputation and is well positioned for growth.
“We will get through this,” Atkins said of the current economic climate. “With the plans we have, we know that they will be able to move the economy into a different gear.”
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