LONDON (Reuters) – British foreign secretary Jeremy Hunts plans for tax cuts and more defence spending if he becomes prime minister carry a cost of around 36 billion pounds a year, estimates from the Institute for Fiscal Studies showed on Thursday.
Conservative Party leadership candidate Jeremy Hunt waves as he leaves his home in London, Britain, June 26, 2019. REUTERS/Toby Melville
The IFS, an independent think tank, this week put a 20 billion-pound estimate on the tax cuts promised by Boris Johnson who is competing with Hunt to succeed Theresa May.
“Like his rival, Jeremy Hunt has made some expensive pledges in his campaign to become prime minister,” IFS director Paul Johnson said.
To put the figures into context, Britains official budget forecasters expect a 29 billion-pound budget deficit this year, assuming there is an orderly Brexit, and for the government to raise total revenues of 811 billion pounds.
Hunts proposal to cut tax on company profits to 12.5% from 17% would cost about 13 billion pounds a year initially, though possibly less in the longer term if it encouraged multinational businesses to book profits in Britain.
The country already has the lowest headline rate of corporation tax of any large advanced economy, though Ireland and some eastern European countries are lower.
Cutting interest rates on student loans, another of Hunts ideas, would have little long-term cost, given the high rate of loan write-offs already forecast, but his plan to raise defence spending to 2.5% of national income from 2% would cost 15 billion pounds a year.
“(This) would leave no scope to relieve the pressure on other areas of public spending, without tax rises or a fiscal stance which risked putting debt on a rising path,” the IFSs Johnson said. Read More