The chancellor, Jeremy Hunt, has stated that the government is currently unable to discuss tax cuts and is focused on establishing a credible plan to achieve that goal. He believes that artificial intelligence (AI) and welfare reforms can break the cycle of constantly increasing taxes by enhancing productivity in both the public and private sectors. The Institute for Fiscal Studies recently revealed that tax payments are projected to reach 37% of national income by the next general election, the highest level since 1948. This would mark a significant increase compared to the previous election and the largest rise during a parliamentary term since World War II.
Hunt emphasized in an interview with The Times of London that he cannot currently address tax cuts due to the substantial increase in interest payments on government debt. He stated that the question the government needs to address is how they can credibly lower taxes. According to Hunt, the UK needs a more productive state, rather than a larger one, which would allow tax rates to decline relative to GDP. He stressed the importance of improving public services to meet the demands of an aging population without resorting to continuously increasing taxes.
To achieve this, Hunt highlighted the need to boost productivity in the public sector by 0.5% in order to stabilize the tax-to-GDP ratio. He intends to address unnecessary administrative work within government departments in an upcoming plan. Additionally, he proposed utilizing AI to assist doctors, teachers, police officers, and other civil servants in administrative tasks, thereby increasing their productivity. Hunt acknowledged that implementing such a system overhaul would require initial investment and emphasized the importance of Treasury investment in technology.
Hunt also expressed his intention to reform welfare to prevent individuals from leaving the workforce. He noted that many people transition from underemployment to reliance on welfare without any obligation to seek employment, often due to mental health issues. He voiced concern about the impact on the economy and individuals affected by this trend. The government aims to provide early treatment for mental health conditions and facilitate the continued employment of sick individuals.
In conclusion, while tax cuts are currently ruled out, the Chancellor believes that AI and welfare reforms can break the cycle of rising taxes by enhancing productivity. The government aims to stabilize the tax burden relative to national income and invest in technology to improve public services. Additionally, welfare reforms are proposed to prevent people from leaving the workforce and address the impact of mental health issues on employment.