London – British Finance Secretary Jeremy Hunt said yesterday that he will not make inflation-boosting tax cuts, days before he announces a major budget update that is widely expected to contain reductions in some taxes.
Hunt is due to deliver an Autumn Statement on Wednesday that he hopes will revive the fortunes of both Britain’s stagnating economy and the Conservatives in government ahead of an election scheduled for next year, and the Sunday Times reported that he was considering cutting the income or social security tax.
He has come under pressure from some Conservative lawmakers who, alarmed by the opposition Labor Party’s big lead in opinion polls, have demanded he carry out tax cuts.
“We want to reduce the tax burden, but we will only do it responsibly,” Hunt told Sky News. “The one thing we won’t do is some kind of tax cut that fuels inflation.”
Annual inflation fell to 4.6% in October from 6.7% the previous month, putting Prime Minister Rishi Sunak on track to deliver on his promise to halve it by 2023.
“I think the British economy has turned around this week,” Hunt said in another interview with Times Radio, adding that his priority was growth. “I will do everything I can think of to drive growth.”
Asked whether he will cut inheritance tax – a move the Sunday Times said could be delayed due to bad press – Hunt told Sky that “everything is on the table” ahead of his statement. Labor Economy spokeswoman Rachel Reeves said cutting inheritance tax would be the wrong priority in a cost of living crisis.
“Lowering taxes on workers – if the Government can explain where the money comes from – is something I would support,” Reeves told Sky News. Hunt’s options are limited following heavy public spending on the Covid-19 pandemic and last year’s surge in energy prices. Public debt is now close to 100% of economic output, more than triple what it was 20 years ago.
Still, official forecasts to be published on Wednesday are expected to show Hunt has more room to cut taxes before running into trouble with fiscal rules than in his annual budget published in March.
“If we want to be a dynamic, prosperous, energetic and vibrant economy, we need lower tax pressure,” Hunt told Times Radio, adding that the only way to reduce personal taxes was to spend public money more efficiently.
“We want to show people that there is a path to lower taxes, but we also want to be honest with people, this is not going to happen overnight.”
Although the UK’s tax revenue is at its highest level since the 1940s, according to the Institute for Fiscal Studies, the country’s tax rate is lower than in most other Western European countries. Data for 2021 from the Organization for Economic Co-operation and Development showed the UK was the lowest among major European countries, well below France’s 45% or Germany’s 40%.