Treasury working on 2p Tory tax giveaway in September after GDP boost

The Treasury is working on plans for a pre-election giveaway budget as the Conservatives aim to make political gains from an improving economy.

Jeremy Hunt is understood to want another 2p cut to national insurance in time for the general election, allowing him to argue that he is boosting voters’ living standards.

But Labour is planning to campaign on the basis that the Tories have overseen a period of economic chaos with the public facing an ongoing cost-of-living crisis.

Britain’s GDP grew by 0.6 per cent in the first quarter of this year, the Office for National Statistics said on Friday – ending a recession which took held in the second half of 2022.

The ONS’s chief economist said that the UK economy was “going gangbusters” after the better-than-expected figures were published, while Rishi Sunak claimed the economy was showing “momentum”.

The Chancellor hopes that an improving economic picture will give him additional headroom to cut taxes once again before the general election expected in October or November, with a further 2p off national insurance seen by insiders as the most likely giveaway.

Mr Hunt has pencilled in September for a possible autumn statement, multiple Whitehall sources have told i, with work by Treasury officials already beginning on the policy options available. A senior Government source said: “The civil service is an unstoppable machine so they will get on with the work they need to do regardless of the political cycle.”

A No 10 spokesman said: “Both the Prime Minister and Chancellor have said before more generally – obviously I wouldn’t pre-empt any fiscal events – but more generally, we want to cut taxes further where we can and where it’s financially responsible to do.”

But some Conservatives are sceptical that more tax cuts can help the party’s electoral prospects. One Government insider said: “It would be great if we can cut NI again in the autumn but I don’t think we’ll be thanked.”

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Patrick English of pollsters YouGov warned that the Tories cannot simply rely on better economic data for a political recovery.

He told i: “I wouldn’t expect the GDP figures themselves to move the dial much. It will all come down to the extent to which voters feel like things are improving for their household finances come election day.

“It’s not enough for headline figures to point in the right direction, voters need the perception that things are going in the right direction for them before we will see any movement in the polls.”

Rachel Reeves, the shadow Chancellor, insisted that the GDP figures did not help many people struggling with their living costs.

She said: “This is no time for Conservative ministers to be doing a victory lap and telling the British people that they have never had it so good. The economy is still £300 smaller per person than when Rishi Sunak became Prime Minister.”

Labour insiders said they would continue to push the message that the economic recovery has not been felt in voters’ pockets following a speech by Ms Reeves this week where she accused ministers of “gaslighting” the public.

A source said: “We are in touch with people’s lived experience. All of the indicators we are looking at show that people don’t feel the economy is turning the corner. The Conservatives are assuming that the public follows economic data rather than what is in their own bank balance.”

But a Tory insider retorted: “Rachel giving that speech shows Labour know things are turning in the right direction.” Labour has also pointed to survey data which suggests voters still back Sir Keir Starmer and Ms Reeves to manage the economy ahead of Mr Sunak and Mr Hunt.

Responding to the GDP figures, Mr Sunak told Sky News: “I am pleased that while there’s more work to do, today’s figures show that the economy now has real momentum, and I’m confident that with time, people will start to feel the benefits of that.” He added: “I am confident the economy is getting healthier every week.”