Business

Jeremy Hunt's tax plans 'could cost up to £65bn'

Foreign Secretary Jeremy Hunt Image copyright EPA

Jeremy Hunt's promises in his race to be the next Conservative Party leader would cost between £37-65bn, according to the Institute for Fiscal Studies.

Mr Hunt has proposed a corporation tax cut and an increase in the point at which workers pay National Insurance.

He would also raise defence spending and cut the interest on student debt.

Mr Hunt's campaign said the pledges were "designed to turbocharge the economy attracting inward investment and driving growth."

However, the IFS concluded the foreign secretary's plans would leave no scope to relieve the pressure on other spending departments without tax rises or risking higher borrowing.

The IFS has also analysed Mr Hunt's rival Boris Johnson's tax plan and said they would cost "many billions" and benefit the wealthy the most.

In its analysis of Mr Hunt's proposals the IFS said:

  • Cutting the corporate tax rate to 12.5% could cost £13bn a year in the short run
  • Raising the National Insurance threshold would cost at least £3bn for every £1,000 it is increased, so raising it to the same level as income tax, which is £12,500, would cost £11bn a year
  • Increasing defence spending from 2% of GDP to 2.5%, would cost £12bn more but in the past Mr Hunt has talked about doubling it to 4%, which would cost £40bn a year extra
  • Cutting interest rates on student loans would cost £1bn more

IFS director Paul Johnson said "like his rival" Boris Johnson, Mr Hunt had made some "expensive pledges".

The IFS said Mr Hunt's policies for higher spending and lower taxes would "amplify the long-run challenges facing the UK public finances.

"The UK already faces considerable spending pressures from an ageing population and rising health care costs.

"Mr Hunt's combination of policy proposals would exacerbate these pressures and widen a gap in the public finances that will ultimately need to be filled through some combination of higher borrowing, tax increases or cuts to other areas of spending."

Mr Hunt's campaign responded: "By growing our economy we can afford to invest in our public services, support the lowest paid and ensure that Britain walks tall in the world again, all while ensuring that debt continues to fall."

More on this story