Tories see Jeremy Hunt's Budget as the last desperate roll of the dice to stay in power at Westminster

As Conservative MPs despair at the repeated pummelings at the hands of voters in parliamentary by-elections, some look to Jeremy Hunt to deliver a ‘Conservative’ (i.e. tax cutting) budget.

They see it as the last desperate roll of the political dice in an effort to cling to power.

The omens are not good. The polls are miserable. The prime minister’s own ratings are so bad that there are private plots to oust him. The economy is in recession. Net migration is exploding. The governing party is an undisciplined rabble and has been since the days of Theresa May’s premiership.

The more sober among the Tory faithful privately accept the game is up. Their fear is that a period of opposition will elevate the perennial backstabbing into a full- on civil war when defeat arrives. With the threat from Reform UK, the Tories are likely to be dragged to the right and the fear of many is that they will become unelectable.

The Budget on March 6 is therefore of huge significance; a chance to reconnect with the base, an opportunity for a launchpad to fight back against an opposition who are barely tested because the governing party cannot shift the narrative from their own shortcomings.

Hunt has already shaved 2% off national insurance as a result of some headroom in the public finances. But this headroom can be transitory, and it is debatable if it was prudent to bake in long term tax cuts to the public finances on the basis of shifting forecasts.

It is, therefore, even more concerning that some Conservatives have been making bullish noises about large tax cuts in the March budget, although Hunt himself has struck a cautionary tone on the basis of yet more forecasts suggesting that the fiscal headroom for tax cuts is not as large as first thought.

Low tax Tories dream of cuts to the basic rate and the abolition of inheritance tax, and business look for cuts to corporation tax.

What is clear is that Hunt will do something on March 6 – the only questions are which tax(es) will he cut and how far will he go?

Today, that irritant for finance ministers throughout the UK, the Institute for Fiscal Studies (IFS), lambasts the general approach to the public finances taken by the government.

In particular, they are critical of tax cuts that also assume large cuts in public spending and where the government do not specify where they will cut.

They point out UK taxes are heading to record-high levels of national income despite Hunt’s measures. That’s because tax allowances and thresholds are being frozen for the next four years, bringing millions more into paying tax for the first time, or many paying a higher rate of tax. This is the phenomenon known as “fiscal drag”.

The government’s spending plans envisage large cuts to public spending. The IFS observe: “Even this unhappy outlook for the public finances is predicated on a fresh round of post-election spending cuts. Unless the Chancellor is willing to spell out where the cuts will fall, the temptation to scale back provisional spending plans further to ‘pay for’ new tax cuts should be avoided.”

And they fire a warning about repeating the policy of funding long term cuts on the basis of forecasts that – by their nature – should be heavily caveated.

Again, the IFS observe: ‘In November’s Autumn Statement, the Chancellor ignored the impacts of higher inflation on public service budgets and instead used additional tax revenues to fund eye-catching tax cuts.

“At next week’s Budget, he might be tempted to try a similar trick, this time banking the higher revenues that come from a larger population, while ignoring the additional pressures that a larger population will place on the NHS, local government and other services.”

The IFS view is that unless the government is upfront on what it will cut to meet its tax and spending plans, it should not be cutting taxes at this time.

And the IFS say if economic growth is the name of the game, then the Chancellor should not be looking at cuts to personal taxation but to taxes like stamp duty and levies related to trading in shares.

Many on the Conservative right pine for tax cutting as a return to the days of Thatcherism. I would respectfully suggest that if they think that Margaret Thatcher would have cut taxes on the basis of forecasts and with government debt at current levels, then they should read the Ladybird book on Thatcher’s view of “sound money”.

Thatcher believed in dealing with debt before you spend money. She also believed that tax cuts should be paid for. The observations of the IFS have more of an echo of Thatcher’s views on sound money than the rhetoric that comes from many Conservative MPs.

For all that, if Jeremy Hunt does go ahead with irresponsible tax cuts allied to projections for public spending cuts that are unspecified, then the legacy of his folly will be one major headache for an incoming Labour Chancellor.

Rachel Reeves has been wooing business leaders with more than a degree of success, in part because they despair of the short-termism and incompetence (remember Liz Truss) that has been the hallmark of the Conservatives’ management of the public finances.

Labour’s chief secretary of the Treasury in 2010, Liam Byrne, once famously left a note for the incoming government declaring: ‘I’m afraid there’s no money’.

Should a Conservative minister decide to replicate the badinage, any note may well lead “try scaling that debt mountain”.