The chancellor has refused to confirm speculation that cuts to income tax or national insurance could feature in his autumn statement, as Political Correspondent Tom Sheldrick reports
Chancellor Jeremy Hunt has heightened expectations that he will cut taxes on businesses in a bid to boost growth with his autumn statement.
He has also said he needs to take “difficult decisions” as he considers squeezing welfare payments by billions while slashing inheritance tax in a bid to appeal to more traditional Tory voters.
Reports have emerged Prime Minister Rishi Sunak and his chancellor were weighing up cuts to income tax or national insurance at the 11th hour, as northern Conservatives warned them Wednesday’s autumn statement should focus instead on lower-paid workers and businesses.
But on Sunday, Mr Hunt downplayed chances of reducing income tax, and persistently warned against changes that could fuel inflation, dampening speculation that taxes on work could be reduced as he seeks to avoid prices spiraling again.
He suggested during a round of broadcast interviews ahead of Wednesday’s financial package that the personal tax burden will not come down “overnight”.
Mr Hunt made clear that his “priority is backing British business” after promising an “autumn statement for growth”.
He, and Mr Sunak have been under pressure from right of the party, as Suella Braverman remained on the attack after her sacking as home secretary, with Westminster observers suspecting she has been playing a long game for a possible leadership challenge in the future.
Mr Hunt hinted he could unveil tax cuts as he promised an “autumn statement for growth” and said now is a “turning point for the economy” after inflation was halved.
But slashing inheritance tax while effectively cutting working-age welfare payments for millions of people would draw criticism for supporting the wealthy while society struggles.
Mr Hunt told broadcasters there is “no east way to reduce the tax burden” and argued: “What we need to do is take difficult decisions to reform the welfare state.”
Typically ministers use the September figure for inflation when uprating working-age benefits, which would mean a 6.7% hike.
But Mr Hunt has not ruled out using October’s far lower figure of 4.6%, which economists say would cut spending by around £3 billion.
The savings would largely affect working-age households receiving disability or means-tested benefits, according to the Institute for Fiscal Studies.
The Observer reported John Stevenson, who chairs the Northern Research Group of Tory MPs, as saying that he backs reforming inheritance but warning that “at this time any tax cuts should be aimed at helping businesses or the lower paid”.
Slashing inheritance tax – potentially by half – would be popular with the Tory right as Mr Sunak comes under growing pressure from that wing of his party, but would only directly benefit a small proportion of the public.
Only around 4% of deaths in 2020/21 resulted in inheritance tax being paid, with exemptions allowing many couples to pass on up to £1 million tax-free.
Speaking on Sunday, Mr Hunt did not rule out any specific changes, including most controversially to inheritance tax, saying “everything is on the table in an autumn statement”.
He stressed that “lower tax is essential to economic growth” he told Sky News.
Rachel Reeves, his Labour shadow, warned cutting inheritance tax during a cost-of-living crisis would be wrong amid some Tory unease over the possible move.
She also warned against the “gradual erosion of people’s incomes” if Mr Hunt goes ahead and squeezes billions from benefits payments, as has been under consideration.
Inheritance tax is charged at 40% on estates of more than £325,000, with an extra £175,000 towards a main residence passed to direct descendants. But the Tories are said to be considering cutting it in half before a potential promise to abolish it entirely in the next Tory manifesto, which could cost £7 billion a year in the short term.
However, the Institute for Fiscal Studies forecast that the amount that the tax raises could rise to more than £15 billion by 2033.
Mr Hunt is poised to announce that households closest to new pylons and electricity substations could receive up to £10,000 off their bills over a decade under plans aimed at boosting growth.
However, Liberal Democrat Treasury spokeswoman Sarah Olney said: “This scheme would create a postcode lottery system leaving millions of families still facing higher energy bills while others benefit.”
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