Following the cut to National Insurnance, Chancellor Jeremy Hunt has said he is unsure if the Government can afford further tax cuts.
Mr Hunt said he wanted to further ease the tax burden, which is expected to rise to the highest level since the Second World War before the end of this decade, but he doesn’t yet know if he can.
He called the NI reduction “the start of a process”, adding: “If I can afford to go further I will… I don’t yet know if I can.”
Speaking on the Rest is Money podcast, Mr Hunt explained to economics expert Robert Peston that all he can control as Chancellor is how competitive the UK will be in five to ten years by the policies he introduces.
His focus on tax cuts aims to close the productivity gap between Britian and other parts of the world such as Germany and the US.
Given that Mr Hunt is so passionate about closing the productivity gap, Mr Preston wondered why the Government is so focussed on tax cuts.
Mr Hunt said: “I think one of the things that’s really interesting is that people like the International Monetary Fund, the centre of economics and business research, they predict that over the years ahead we are going to grow faster than France and Germany.
“The CBR said that we are going to close the gap with Germany over the decade ahead, and that is because of our strength in start-ups.”
As a conservative, he explained that he believes that lower tax economies are more dynamic, more entrepreneurial and more energetic. That’s how he belives the UK can be more competative.
Business correspondent, Steph McGovern questioned whether Mr Hunt’s decision were all based on tax advantages. However he explained that when he was just starting out, his business never made a profit for the first five years.
Despite not earning a penny in profit, the thing that irritated Mr Hunt the most he said was the taxes.
He said: “The taxes you have to pay even before you made a penny of profit. So for example, business rates employers national insurance contribution. These are really expensive taxes that you have to pay right out front.
“So if you can bring those taxes down, you reduce the number of businesses that go bust. You make it easier for businesses to get off the ground.”
In a bid to help the ecoonmy long term, Mr Hunt has explained how lower taxes could help start up businessess which could in turn groow the economy long term.
Speaking on the UKs productivity problem, the chancellor explained we are 15 percent less productive than Germany.
This is because Germany invest a lot more in plant and machinery meaning workers can produce more. However the UK have grown faster than them as we have a tremendously strong start-up culture.
He stated: “If we combine our start-up culture plus the productivity found in Germany and the US we could really smash it.”
