Rishi Sunak said there is “more to come” in terms of tax cuts, in a fresh hint the Tories could offer a pre-election giveaway.
The prime minister said he wanted to slash taxes “when we can responsibly do so”, echoing comments made by the chancellor this week.
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Talking to Sky News on the fringes of the World Economic Forum in Davos, Jeremy Hunt said on Thursday that “the direction of travel” was for the UK to emulate successful low-tax economies.
Mr Sunak, speaking to broadcasters during a visit to Hampshire, said the 2p cut to the main rate of national insurance that came into force this month had already been a “tax cut for 27 million people in work”.
He continued: “And we said that we do want to cut taxes for future events when we can responsibly do so.
“Our priorities are very clear. It is controlling spending and welfare so that we can cut people’s taxes.
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“The plan is working, because we are already doing it – stick with it and there is more to come.”
Tax experts and opposition MPs have disputed calling the national insurance change a “cut”, saying the benefits are effectively cancelled out by the government’s previous freezing of tax thresholds.
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Mr Sunak introduced the freezes when he was chancellor back in 2021 and as prime minister extended the time they would need to be in place, from 2026 to 2028.
The Institute for Fiscal Studies said this means that even with the national insurance cut, this will be the biggest tax-rising parliament on record, with taxes expected to reach a post-war high by the time of the election.
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The bleak forecast has seen Mr Sunak come under pressure from Tory MPs to cut more taxes to turn around his party’s fortunes in the polls – but his room for manoeuvre is limited if he wants to meet his target of getting debt falling as a proportion of gross domestic product (GDP).
The prime minister has suggested cuts could be funded by tightening welfare rules, with the government seeking to bring in reforms which make it harder for people to claim out-of-work and sick benefits.
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With an election expected this year, the spring budget will be one of the last chances for ministers to announce tax cuts.
Speaking from Davos, Mr Hunt said while he has yet to see the fiscal numbers ahead of the March event, he is hopeful of reducing taxes.
“I look around the world and I see that the parts of the world like the United States, like Asia, that are growing the fastest, have the most dynamic economies, tend to be places with lower taxes,” he said.
“And that was why in the autumn statement, we decisively cut taxes.
“So my priority in the budget will be growth – because if I can grow the economy, that will mean that then we have more money for the NHS, we can relieve the pressure on families, we can invest in our brilliant armed forces.”
