Chancellor tempers tax cut expectations as £800m tech package to free up public service workers’ time revealed

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Chancellor Jeremy Hunt has tempered expectations of tax cuts in Wednesday’s budget as he announced an £800m package of technology reforms designed to free up time for frontline public sector workers.

As part of Treasury reforms, police will use drones to assess incidents such as traffic collisions and artificial intelligence will be deployed to cut MRI scan times by a third.

The department said the changes have the potential to deliver £1.8bn worth of benefits to public sector productivity by 2029.

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In a statement, the chancellor said: “We shouldn’t fall into the trap of thinking more spending buys us better public services.

“There is too much waste in the system and we want public servants to get back to doing what matters most: teaching our children, keeping us safe and treating us when we’re sick.

“That’s why our plan is about reaping the rewards of productivity, from faster access to MRIs for patients to hundreds of thousands of police hours freed up to attend burglaries or incidents of domestic abuse.”

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Darren Jones, Labour’s shadow chief secretary to the Treasury, said the announcement amounted to “spin without substance”.

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Meanwhile, Mr Hunt told The Sunday Telegraph that he “won’t take any risks” after previous speculation he may cut income tax.

The newspaper said the chancellor is due to meet Prime Minister Rishi Sunak on Sunday evening to make a final decision on whether a 2p cut is affordable.

Mr Hunt said that bringing down the current tax burden is a “long path” and that the financial forecasts setting out how much so-called “headroom” he has to meet his fiscal rules had “gone against us”.

Pic: PA
Prime Minister Rishi Sunak (left) and Chancellor of the Exchequer Jeremy Hunt in East Yorkshire. Picture date: Monday February 26, 2024.
Image:
Rishi Sunak and Jeremy Hunt last year. Pic: PA

According to The Sunday Times, the Office for Budget Responsibility told the chancellor on Wednesday that he has £12.8bn of headroom to play with – more than £2bn less than the figure the Treasury is said to have previously been basing its calculations on.

Mr Hunt is under pressure to deliver tax cuts in what could be the last economic set piece from the Conservative government before the next general election.

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The tax burden is reaching record levels, with it expected to rise to its highest point since the Second World War before the end of this decade as the country looks to pay back heavy borrowing used for support during COVID-19 and the energy spike in the aftermath of Russia’s invasion of Ukraine.

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No 10 and No 11 are said to be weighing up if it is possible to administer such a cut or whether to reduce national insurance contributions further, having sliced it by two percentage points in the autumn statement.

The cut in November did not reduce taxation for pensioners – a key voter demographic for the Tories – as they do not pay national insurance.

Mr Hunt is said to be preparing to raise £300m by changing the preferential tax regime for holiday lets in the budget.

Another £500m may be raised by introducing a levy on vapes.

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What public finance figures mean for the budget

He also is thought to be considering abolishing the non-dom status as a potential way of raising revenue.

Non-domiciled status allows foreign nationals who live in the UK, but are officially domiciled overseas, to avoid paying UK tax on their overseas income or capital gains.

Mr Sunak’s wife Akshata Murty has previously enjoyed non-dom status.

Watch Jeremy Hunt appear on Sunday Morning With Trevor Phillips on Sky News from 8.30am.

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