More tax cuts are on their way, according to the both the Prime Minister and Chancellor who have written comment pieces in The Sun on Sunday and The Mail on Sunday respectively to indicate their intentions ahead of the upcoming March Budget. This is interesting because their published plans suggest a rise in taxes, to levels not seen in peacetime history. Might they be about to change their mind?

The Prime Minister used an outing to Hampshire to give the green light to tax cuts at ‘future events when we can responsibly do so’, while the Chancellor used his trip to Davos to say that a lower tax burden was ‘the direction of travel we would like to go in’. Their comments were flagged as an indication of intent, if the public finances would allow for more tax cuts.

That subtlety has fast evaporated. It’s only taken a few days for both Sunak and Hunt to double down on their comments. Sunak is using the opportunity to push the government’s new favourite line – that the public should ‘stick to the plan’ that has halved inflation – which, he says this morning, will lead to ‘tax cuts with me or tax rises with Starmer’. For point of reference, here’s the OBR’s assessment of the current “direction of travel”:-

Hunt’s comment piece touches on the same points as the Prime Minister’s, but he goes slightly further on the tax pledge.  ‘Because of our careful management of the economy,’ says Hunt, ‘we can start cutting taxes again in a way is both affordable and boosts our growth’ – a point that seems to be about past and future decision making, as he notes that the 2p cut to employee National Insurance last year means we are ‘starting this month with a tax cut for 27 million people worth £450 to a worker on the average salary.’

Warming to this theme, Hunt draws comparisons between the current government and former Chancellor Nigel Lawson, who oversaw Margaret Thatcher’s tax-slashing agenda in the period after her government had made difficult fiscal decisions to get inflation under control. ‘Just as Nigel Lawson positioned the City of London for the finance boom in the 1980s,’ he writes ‘this period of Conservative Government has seen the UK positioned for the massive technological boom we’re set to see in the coming years.’

It seems Hunt is feeling optimistic about his scope for another round of tax cuts in the upcoming Spring Budget. The Financial Times reports that he will have more fiscal headroom than previously expected, thanks to the government borrowing less than forecast in recent months. After spending a long year debating the merits of different kinds of tax cuts, it seems the government now leans towards a cut to income tax – an option that will be felt for by more people, even if it means the cut has to be smaller (each 1p taken off income tax will account for £6bn-£7bn). But Sunak and Hunt’s comments this morning are so enthusiastic, the hopefuls in their party could be forgiven for thinking some big rabbits might be pulled out of the hat come 6 March, relating to a variety of tax cuts.

It has seemed improbable for some time now that the Tories would pass up on the chance for pre-election tax cuts. But the question remains: will it work? As I say in the Telegraph this weekend, the Tory playbook seems to be glitching. The party is cutting some taxes, yet the polls aren’t moving. If anything, they are getting worse.

One difficulty will be reconciling tax cut claims with people’s pay packets. The millions of people being dragged into paying higher rates of tax – thanks to frozen tax thresholds – were not so easily fooled by the Conservative party’s claims last year that tax was falling. Factor in the Budget measures and no one is better off, according to recent analysis by the Institute for Fiscal Studies. The below graph shows the National Insurance tax cut in yellow: that’s what they talk about. The effect of all tax changes under Sunak (as Chancellor or PM), the measures they don’t talk about, are in green.

The timing of the proposed tax cuts may also make people suspicious. So the government seems to have clocked that any plans for further tax cuts need to fit into a broader narrative about how the next parliament would run. Hunt’s comments today are not just about what might be delivered in the next few months, but about the longer-term, where he insists his party would ‘keep building a stronger economy where hard work is rewarded, where ambition and aspiration are celebrated, and where young people get the skills they need to succeed in life.’ For the Tories to be in any position to usher in such a future, they will have to convince more people at their next attempt at tax-cutting. For as long as taxes are rising, it will be difficult to persuade people that they are falling. We’ll have to see how Hunt will square this circle.