Jeremy Hunt’s tax-cuts will add just 0.25% to GDP, warns BoE

In a critical evaluation of the chancellor’s fiscal revamp, the central bank said the measures “could” increase national output, but that any boost would barely scratch the surface

Jeremy Hunt’s tax-cutting autumn statement will add just 0.25% to the size of the economy in the coming years, the Bank of England has cautioned.

In a critical evaluation of the chancellor’s fiscal revamp, the central bank said the measures “could” increase national output, but that any boost would barely scratch the surface.

It comes after the economy declined 0.3% in October alone, meaning any boost from Hunt’s business and personal tax cuts may not even cover that month’s dip.

Bank staff had provisionally estimated that these additional measures could raise the level of GDP by nearly 0.25% over coming years, it said in a report.

Delivering his so-called Autumn Statement for Growth last month, Hunt cut the rate of national insurance by 2%. The chancellor also permanently extended full expensing, a scheme allowing firms to offset investment in machinery and equipment against their tax bills.

Apart from a promised 110 growth measures, Hunt said: We are delivering the biggest business tax cut in modern British history, the biggest ever cut to employee and self-employed National Insurance and the largest package of tax cuts to be implemented since the 1980s.

An Autumn Statement for a country that has turned a corner. An Autumn Statement for Growth, he added.

But apart from his statement, spending watchdog the Office for Budget Responsibility revised down its forecasts for Britain’s economic growth, saying the economy will grow by only 0.7% next year, compared with an earlier forecast of 1.8%.

And now the Bank of England has said the effect of Hunt’s measures will be minimal.