Following on from the autumn statement in today’s speech, Rishi Sunak promised to start reducing the tax burden.
Two days before a key financial package, the Prime Minister insisted that easing inflation meant the government could cut taxes.
He said the “next stage” would begin soon – with planned cuts to income tax and national insurance as the Tories desperately try to regain ground ahead of next year’s general election.
“We will do this seriously and responsibly, based on sound fiscal rules and based on independent forecasts from the Office for Budget Responsibility,” Sunak said.
– And we can’t do everything at once. This will require discipline and we need to prioritize.
“But over time we can and will reduce taxes.”
The intervention comes after Jeremy Hunt fueled speculation that the tax burden – the highest since the war – would be reduced.
Business taxes are expected to be a major topic after the Chancellor was given leeway on better-than-expected earnings. Sunak said this morning that the Government’s “priority has always been the supply side of our economy”.
Hunt and Sunak are understood to have put the inheritance tax cap on hold amid concerns the move could be used as a political weapon by Labor.
Today’s other events:
- Sunak outlined five “five long-term decisions” he is making for the economy and public finances: reducing debt, cutting taxes, building sustainable energy, supporting British businesses and delivering world-class education;
- The Prime Minister said taxes will be a major dividing line among Labor as it looks ahead to the election;
- The Department for Work and Pensions has sent a further signal that benefits will be increased by an amount less than the usual September inflation rate.
In a speech two days before a key financial package, Rishi Sunak will insist the easing of inflation will show Britain is finally on the mend
The IFS had previously calculated that the tax burden would reach its highest level since World War II
The Prime Minister was boosted last week by data showing that the inflation rate fell to 4.6% in October, down from 6.7%. in September
Freezing tax brackets, rampant inflation and rising wages are causing government revenues to soar as people are drawn deeper into the system.
For months, Hunt and Sunak have been sharply critical of the idea of tax cuts this year, warning it could increase upward pressure on prices.
However, last week the headline CPI rate fell sharply to 4.6 per cent, meeting the Prime Minister’s target of halving it this year, although it is still more than twice the Bank of England’s target.
Friday’s forecasts from the Office for Budget Responsibility (OBR) made ministers optimistic.
They showed that there is a fiscal headroom of up to £30 billion, enough to reduce basic rates of income tax or national insurance contributions.
Despite a slightly improved fiscal position, the government’s finances are extremely tight and the economy is expected to remain flat in the coming years. Many conservatives say the current tax cuts will help spur economic growth.
The Autumn Statement was agreed and signed last night before being forwarded to the OBR for inspection.
Treasury officials were examining how feasible a 1 or 2 pence cut would be ahead of Wednesday’s announcement. They ruled out loosening the frozen thresholds around fees.
A 2p cut in income tax will cost between £13 billion and £14 billion a year and will save British households on average around £450 a year.
It would also give the Tories a much-needed boost ahead of next autumn’s elections, as they are polling more than 20 points ahead of Labor.
The Chancellor and Prime Minister are under increasing pressure from backbench MPs to cut tariffs, with tax burdens set to hit a 70-year high.
Hunt told Sky News yesterday: “Everything was discussed in the autumn statement.
The Prime Minister’s intervention comes after Jeremy Hunt (pictured yesterday) fueled speculation that the tax burden – the highest since the war – would be cut
ONS data shows that the British economy is slowing down over the course of the year
“I will not talk about any individual taxes because that would lead to even more feverish speculation.
“I will give you a general idea about taxes. It’s too high. The Conservative government wants to reduce it because we believe that lower taxes are necessary for economic growth… I want to reduce our tax burden. “For a productive, dynamic and resilient economy, it is important to motivate people to work and take the necessary risks.”
However, he stressed that ministers could decide to postpone any cuts until the spring budget, saying “Rome wasn’t built in a day.”
He added: “I actually want to show people that there is a path to lower taxes. But we also want to be honest with people – it won’t happen overnight.” Inflation fell to 4.6 percent in October, meaning ministers achieved their target of halving it by the end of the year. Some MPs believe this provides more cover for accelerating tax cuts. But Treasury officials believe the personal tax cuts could cause inflation to skyrocket again and threaten the goal of bringing it down to 2 percent.
In an interview with the BBC, Hunt was asked if he “regretted” the high tax burden. He said: “In 2019, no one expected a pandemic or a once-in-a-century energy shock like the 1970s, so we had to respond to it, and I don’t pretend I didn’t have to make difficult decisions.