Jeremy Hunt struggles to find Budget goodies as he faces fiscal ‘headlock’

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Jeremy Hunt, Britain’s chancellor, is struggling to escape a fiscal “headlock” imposed by his official forecasters as he tries to find space for tax cuts and lift pre-Budget gloom among Conservative MPs.

Hunt will prioritise personal tax cuts on March 6, but his allies say his room for manoeuvre is limited because of increasingly tight fiscal forecasts produced by the spending watchdog, the Office for Budget Responsibility.

Tory MPs still hope Hunt can spring a surprise by cutting national insurance rates by 2p at a cost of about £10bn, although the chancellor’s aides have insisted this was “impossible at the moment, let alone difficult”.

To try to find cash to fund tax cuts Hunt is looking at targeted tax rises, including on vapes and tobacco, while he hopes to unlock future savings by setting out plans to raise public sector productivity.

Expectation management is an integral part of the pre-Budget ritual, but one Downing Street official claimed it had been “agony” in the past few weeks as policies were ditched because of deteriorating forecasts.

Ideas such as changing tax rules to help middle earners keep more of their child benefit or a cut to stamp duty on share transactions — intended to boost equity markets — have been dropped, according to those close to the Budget process.

A mood of weary acceptance has settled on many Tory MPs that the big tax cuts they hoped might change their party’s pre-election political fortunes are unlikely to materialise.

“It’s almost as if there isn’t a Budget happening at all,” said one senior Tory MP, describing the flat mood at Westminster. Another said: “He will have something, but it won’t be what we hoped for. The OBR has him in a headlock.”

Sir Charles Walker, a Tory grandee, said many MPs would settle for sound economic governance. “I want a government that is…