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Tax cuts on the way? 

The spring budget is nearly upon us and as ever, there is much speculation about what that might entail. In what is almost certainly an election year, the rumour mills are in overdrive with

predictions of tax cuts and incentives to vote for the incumbent government.

 

As Sky News reported today, the chancellor has been lauding the benefits of a low tax economy, arguing that they grow fastest and are more entrepreneurial. This is certainly true, but perhaps counterintuitively, it does come at a cost. Public services and infrastructure rely on government investment and are literally what paves the roads for us all to get to work. It’s a fine tightrope and one that must be walked carefully.


To ease any concerns about widespread cuts, Mr Hunt was at pains to say that any efficiencies would be made in a responsible manner. However, some economists have claimed that any tax cuts made as a pre-election gambit, would have to be undone after the election anyway. Their argument is that public services are already in dire need of support, which is something the taxpayer is already noticing. Any further cutbacks in real terms would be difficult to pull off.

 

To a large degree, the governments hands are tied. Financial support provided during the pandemic will mean that the debt is being repaid for many years to come, and with other world events also having an impact, there’s little wiggle room, if any.

 

One thing is certain though, whichever government is in place by the end of the year will need to play a fine balancing act between stimulating growth and recouping the costs of running a country which is heavily in debt.

 

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