Hunt says lower interest rates could give him room to cut taxes in the spring budget

Jeremy Hunt today said lower interest rates could give him room to cut taxes in the spring budget ahead of the general election.

The Chancellor stressed that the Government has plans to reduce the tax burden 'if we are able to do so', but warned that he will only know what is possible after the Office for Budget Responsibility's forecasts next year.

His comments came as official figures showed the tax authorities collected £77.6 billion last month – the highest figure for November since records began three decades ago.

But the government still borrowed £14.3 billion as it spent more than it earned, including a record £7.7 billion in interest payments on debt. The national debt now stands at almost £2.7 trillion.

And in a headache for Mr Hunt, borrowings during the first eight months of the fiscal year totaled £116.4 billion. That was £24.4 billion more than the same period last year – the second highest figure ever – and £6.3 billion more than forecast.

But despite continued pressure on public finances, analysts said the prospect of lower interest rates meant Hunt would have room for tax cuts ahead of the election.

Samuel Tombs, chief Britain economist at Pantheon Macroeconomics, said the chancellor's “room to maneuver” could double to £25 billion if borrowing costs fall as expected.

And Tory MPs urged Hunt to use his spring budget – likely the last before election day – to reduce the tax burden and boost the Tories' election chances. In an interview on Bloomberg TV, Mr. Hunt said: “If interest payments on debt fall, that may give me more room to maneuver… but I would never use it in a way that would jeopardize the fight against inflation. We would like to reduce the tax burden in a responsible manner.'

Former Home Secretary Dame Priti Patel said Hunt should unblock the tax-free amounts as millions of people have been dragged into higher tax thresholds.

She added: 'Personal tax levels are far too high… I continue to urge the Government to look again at releasing the tax-free allowances and higher tax rates.'

Sir John Redwood, a former Tory minister, said that 'tax cuts are now essential for living standards'.

With inflation having fallen from a peak of 11.1 percent last year to 3.9 percent, the Bank of England is expected to start cutting interest rates next year, with the first cut possibly coming in March.

This will reduce the cost of government borrowing, creating additional room to reduce the tax burden.

Former minister Ranil Jayawardena said: 'The government must be decisive: it is time to abolish inheritance tax.'

The Office for National Statistics said government borrowing reached £116.4 billion in the eight months to the end of November – £24.4 billion more than the same period in 2022.

Principal Secretary to the Treasury Laura Trott said: 'We are making tough decisions in the national interest to control our borrowing needs and improve productivity so we can deliver the public services people need while keeping inflation low .'

Mr Hunt traveled to Bern yesterday to sign a financial services agreement with his Swiss counterpart Karin Keller-Sutter, aimed at facilitating the access of British companies to the Swiss market and vice versa.