Jeremy Hunt has said that tax cuts are “virtually impossible” despite the Government borrowing less-than-expected this year.
In an interview with LBC, the Chancellor said he faces difficult decisions ahead of the Autumn Statement in November.
Commenting on the lack of fiscal headroom he expects to have, Mr Hunt said: “It makes life extremely difficult, it makes tax cuts virtually impossible and it means that I will have another set of, frankly, very difficult decisions.”
His comments came as he faces pressure to cut taxes after the Government borrowed £11.4bn less than expected so far this financial year.
He added: "If you look at what we are having to pay for our long-term debt, it is higher now than it was at the Spring Budget.
"I wish it wasn’t, it makes life extremely difficult, it makes tax cuts virtually impossible, and it means that I will have another set as frankly very difficult decisions.
"I don’t know when that’s going to happen. But I don’t think it’s going to happen before the Autumn Statement on November 22nd."
Martin Beck, chief economic adviser to the EY Item Club forecaster, said that despite having extra billions in fiscal headroom, the chancellor was unlikely to spend his windfalls this autumn.
“The fiscal rules around government borrowing and debt relate to a period five years out, so short-term developments in the fiscal numbers aren’t of much relevance,” Beck said.
Cara Pacitti, senior economist at the Resolution Foundation, said that despite the boost to tax revenues, high inflation also meant public spending was being squeezed in real terms, as the government’s departmental budgets were set before the inflationary surge.
“The chancellor may choose to bank the good borrowing news from higher inflation and ignore the public services pain it is causing in his upcoming autumn statement, but that challenge will need to be confronted by whoever wins the next election,” Pacitti said.