Jeremy Hunt has said that tax cuts ahead of November’s Autumn Statement are “virtually impossible” and has warned that he faces difficult decisions.

The Chancellor said there was no “extra headroom” to cut taxes, because of the need to prioritise the pledge to halve inflation this year to a level of around 5.3 per cent.

The Bank of England decided not to put up interest rates on Thursday, ending a run of 14 successive increases and raising the prospect that they may have peaked.

The decision to hold rates at 5.25 per cent means the amount of interest the Government has to pay on its debt will be lower than previously forecast – raising the possibility that the Treasury will have more to spare for tax cuts.

But interest rates are still far higher than the Office for Budget Responsibility (OBR) anticipated at the time of the Budget in March and are set to stay higher, meaning interest payments on the national debt will stay high.

Mr Hunt told LBC’s Tonight with Andrew Marr that high debt interest payments left him little room for giveaways.