The chancellor is considering whether to slash inheritance and business tax in next week's autumn statement, ITV News has learnt.
Jeremy Hunt is said to want the tax cuts after a higher than expected inflation drop this week but is awaiting final fiscal forecasts from the Office for Budget Responsibility before deciding.
He has previously ruled out any tax cuts but Rishi Sunak has suggested to broadcasters that a halving of inflation this year to 4.6% in October means the government can consider more spending.
Mr Sunak, who has today been in budget discussions with the chancellor, said falling inflation "allows us now to see what other support we can provide" but he offered little clue as to what would be announced next Wednesday.
The autumn statement will form part of another crunch week for the prime minister, as he and ministers seek to bounce back from the blow delivered by the Supreme Court to the flagship Rwanda asylum policy.
He's been under pressure from right wing MPs to announce tax cuts and could bow to their demands in a bid to win back their support after haemorrhaging it following the sacking their talisman Suella Braverman.
Asked about scope for tax cuts, Mr Sunak said: “Well the most important thing economically that’s happened this week is that we met the pledge that I made to halve inflation.
“Now of course I know people are still suffering, they have been, so there’s work to do but that’s an important milestone because inflation is like a tax: it makes everyone feel poorer. It puts the prices of things up, eats into your savings, your pension, and that’s why it was so important to halve inflation.
“I’ve delivered on that because I want to ease the burden on the cost of living for families.
“But that allows us now to see what other support we can provide. For example, this winter pensioners will receive hundreds of pounds of extra support alongside their winter fuel payment to help them with energy bills because we know they’re high.
“But look, this Conservative government has delivered, we are starting to ease the burden on the cost of living.
“There’s work to do and you’ll hear more about that next week in the autumn statement.”
Earlier this week the chancellor said he would use Wednesday’s autumn statement to address labour supply issues and business investment.
Ahead of next week, the government announced a fresh welfare crackdown amid efforts to get people back into work.
Free prescriptions and legal aid will be cut off for benefit claimants who are deemed fit to work and do not seek employment, while the Treasury said digital tools will also be used to “track” attendance at job fairs and interviews under the toughened sanctions regime.
Sir Keir Starmer said he would waiting to see what is in the autumn statement before commenting on any plan to slash inheritance tax.
“We’ll have to wait to see what the government says in its autumn statement. What I want to see is a serious plan for growth,” he told broadcasters during a visit to Scotland.
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