Jeremy Hunt has compared himself to tax-cutting former chancellor Nigel Lawson as he and Rishi Sunak dangled the prospect of further giveaways in the spring Budget.
The Chancellor said the Government’s “plan is working” and “we need to stick to it”, which “means cutting taxes”.
The Prime Minister pledged his party “will always prioritise tax cuts” to ensure Britons’ “hard work is rewarded”.
Mr Hunt likened his record to that of late party grandee Mr Lawson, who slashed personal taxation while serving in the Thatcher government.
Writing in the Mail on Sunday, Mr Hunt said: “Just as Nigel Lawson positioned the City of London for the finance boom in the 1980s, this period of Conservative Government has seen the UK positioned for the massive technological boom we’re set to see in the coming years.”
In his own piece in The Sun on Sunday, Mr Sunak said that “because of the disciplined way we have run the economy” the Government was able to introduce this month’s reduction in national insurance contributions.
“Where we can, we will always prioritise tax cuts to put more of people’s money back in their pockets,” the Tory leader wrote.
Following the announcement in the Chancellor’s autumn statement in November, the main rate of national insurance was reduced by two percentage points, from 12% to 10%, on January 6.
The Treasury says the change means a worker on a £35,000 salary will be £450 better off a year.
But Labour has branded the move a “raw deal” as Mr Hunt has kept tax thresholds frozen, resulting in a de facto tax rise for millions as their wages increase with inflation while tax bands remain static.
The Financial Times reported that Mr Hunt could be handed up to £10 billion in extra headroom against his fiscal targets in the Office for Budget Responsibility (OBR) forecasts, paving the way for deeper tax cuts.
Economists said this could stem from lower borrowing costs on Government debt although the headroom could still be limited by a deteriorating economic outlook and new figures on public borrowing levels, according to the newspaper.
A further cut to already-squeezed Government departments’ budgets is being considered by the Treasury to fund tax cuts if there is no new headroom.
Official figures this week revealed a shock drop in retail sales in December – the biggest since January 2021.
But Mr Hunt struck an optimistic note, writing in his op-ed that conversations at the World Economic Forum in Davos had left him “brimming with confidence about the fundamental strengths of the British economy”.
“Britain is on the up and open for business”.
Chancellor @Jeremy_Hunt spoke at a @wef session at Davos with @Microsoft CEO @satyanadella & @moderna_tx CEO Stéphane Bancel about the UK's strengths in the industries of the future such as tech & life sciences. pic.twitter.com/eGNPnt5hOW
— HM Treasury (@hmtreasury) January 18, 2024
He said: “Global challenges have made life tough for people in Britain but the economy is now turning a corner and we are now starting to see the fruits of our plan.
“Because of our careful management of the economy, we can start cutting taxes again in a way (that) is both affordable and boosts our growth.”
He continued: “The most dynamic economies tend to be places with lower taxes. The lesson is clear: supporting businesses with competitive taxes – not more government spending – is the way to growth.”
The first OBR forecast next week will spark discussions among ministers about what taxes to slash and by how much, with personal tax cuts thought to be favoured.
Mr Hunt will use his March 6 Budget to draw fresh battle lines with Labour ahead of a general election.
He could look to spend all the headroom he is given in a bid to shrink an incoming Labour government’s room for manoeuvre and force it into tax rises to fund its spending plans.
This would bolster Mr Sunak’s attack line on the Labour leader, with which he concluded his article: “The choice is clear — tax cuts with me or tax rises with (Sir Keir) Starmer.”
Shadow chief secretary to the Treasury Darren Jones said: “Jeremy Hunt’s words will read hollow to the millions of people who have been left worse off after 14 years of economic failure.
“Prices are still rising in the shops, monthly mortgage bills are soaring and the average family will be £1,200 worse off under the Tories’ tax plan.
“Britain needs change and a Labour government, not five more years of Conservative failure.”