Rishi Sunak is throwing himself into saving the election with tomorrow’s Autumn Statement, which is expected to include tax cuts as well as higher pensions and benefits.
The Prime Minister and Chancellor Jeremy Hunt have signed off on a package that is expected to include a cut in National Insurance contributions, with more promised for next spring.
Hunt will use some headroom from higher-than-expected incomes and falling inflation to start reducing the burden.
But while there will be efforts to get millions of people off benefits and back into work, ministers have backtracked on suggestions that benefits will be increased by an amount less than the usual inflation figure in September.
The triple lock on state pensions will also be maintained, meaning recipients will be able to count on an 8.5% increase.
Despite the bullish approach, the grim context of the fiscal announcements was laid bare this morning, with official figures showing the UK’s debt mountain stands at £2.6 trillion.
Public sector net debt was £14.9 billion last month, £4.4 billion more than a year earlier and the highest on record outside Covid.
Rishi Sunak throws himself into saving the election with tomorrow’s Autumn Statement, which is expected to include tax cuts as well as pension and benefit increases
Borrowings in October exceeded the £13.7 billion expected by watchdog the Office for Budget Responsibility (OBR) – the first time this financial year it has exceeded official forecasts
Public sector net debt was £14.9 billion last month, £4.4 billion more than a year earlier and the highest on record outside Covid
More polls have shown a bleak picture for the Conservatives’ prospects, with Redfield & Wilton Strategies giving Labor a 19-point lead
The level exceeded the £13.7 billion expected by watchdog the Office for Budget Responsibility (OBR) – the first time this financial year it has exceeded official forecasts.
The ONS reported that debt since the start of the financial year was £98.3 billion, £21.9 billion more than a year earlier. However, this is less than the £115.2 billion proposed by the OBR in March.
In response to the data, Hunt said: “We have met our commitment to halve inflation, but we must continue to support the Bank of England to bring inflation down to 2 per cent.
“This means responsibility for the country’s finances.
“Tomorrow, in my fall statement, I will focus on how to boost business investment and get people back to work to deliver the growth our country needs.”
A Tory source said Sunak had told colleagues the Government needed to “show rather than tell” on tax cuts after raising taxes to record levels.
More polls have shown a bleak picture for the Conservatives’ prospects, with Redfield & Wilton Strategies giving Labor a 19-point lead.
Yesterday Sunak suggested he wanted to cut income taxes to “reward hard work”, fueling speculation that Hunt is about to announce a cut to National Insurance or income tax when he delivers his autumn statement on the economy tomorrow.
Business tax cuts are also expected as ministers try to boost investment and economic growth.
However, the Prime Minister warned that the poor state of public finances combined with persistent inflation problems means that the transition to a lower-tax economy will not be immediate.
Yesterday, in a major speech on the economy, he said: “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.”
Tory strategists believe the tax cut is crucial to reviving the party’s hopes of winning next year’s election. Yesterday, Sunak repeatedly turned against Labor, highlighting the party’s controversial plan to borrow £28 billion a year to pay for green initiatives.
Jeremy Hunt will use some headroom from higher-than-expected revenues and falling inflation to start reducing the burden
The Prime Minister said the program would put future generations in debt and lead to “permanently higher levels of government”, along with higher taxes and inflation.
At a press conference in London, the Prime Minister had no doubts about exactly what taxes would be cut in the autumn announcement.
Whitehall sources said a sharp fall in inflation combined with a better-than-expected economic outlook had convinced the Prime Minister and Chancellor they were in a position to deliver personal tax cuts this week.
Inflation fell to 4.6% last month, meeting the Prime Minister’s promise to halve it this year.
Sunak said this allowed the government to move to “start the next stage and turn our attention to tax cuts”.
He added: “I have never argued that we should not cut taxes. The idea was that we could only cut taxes once we had brought inflation and debt under control.
A one percentage point cut in National Insurance or Income Tax would save a worker earning £30,000 almost £175 a year, while someone earning £50,000 would save almost £375.