The combination of a new tax year and the government’s forecast horizon rolled forward could add an estimated £12bn to Jeremy Hunt’s fiscal ‘headroom’, the IFS has revealed.

The IFS said this boost could allow for a third 2p cut to national insurance in a pre-election fiscal event but warned this should not be the basis for immediate and permanent tax cuts.

It called the boost to the chancellor’s ‘headroom’ a “quirk of a poorly designed fiscal rule”.

“Especially when the government’s adherence to its fiscal mandate is predicated on large, unspecified spending cuts in the next parliament,” it added.

The IFS estimates the next chancellor will inherit a forecast with a budget deficit of around £40bn in 2029-30, low enough to have government debt falling as a share of national income in that year.

However, this is predicated on the next government overseeing significant tax rises, allowing fuel duties to rise with inflation, cutting investment spending and delivering a return to austerity for many public services, according to the IFS.

Personal tax thresholds are due to remain frozen until March 2028 however the IFS has calculated unfreezing them would reduce revenues by £11bn in 2029-30.

Current policy plans imply real-terms cuts to public investment of 2.6 per cent per year over the next parliament, but the IFS has said avoiding those would require increasing spending by £18bn in 2029-30.

Click here to read the full article 



020 7071 3945


Throughout our site you will find links to external websites. Although we make every effort to ensure these links are accurate, up to date and relevant, we cannot take responsibility for pages maintained by external providers.