(Bloomberg) -- UK Chancellor of the Exchequer Jeremy Hunt is set to reveal plans to cut Britain’s tax burden at this week’s Autumn Statement, a pivotal time for the struggling Tories in one of their few remaining set-piece events before a general election expected next year.
Speaking in broadcast interviews on Sunday, Hunt said he wants to “show there is a path to a lower-tax economy” while also safeguarding progress in reducing the rate of inflation. Hunt said he plans to cut taxes for businesses to spur growth and lift the economy by reforming welfare.
Hunt’s announcement of his tax-and-spend plans on Wednesday is due to be his toughest moment yet as Chancellor, needing to preserve hard-won economic stability yet also present voter-pleasing measures that will help close a 20-point poll gap against the main opposition Labour Party. The biggest pressure he faces from Conservative backbenchers is to cut taxes from their post-World-War-II high — but the question of which taxes to cut has become politically contentious.
Hunt and Sunak have been considering a potential cut to the inheritance tax, though the move has already drawn criticism from some Tory MPs and has been a source of division in Sunak’s top team. Two cabinet ministers speaking on condition of anonymity to Bloomberg said it would be the wrong time to slash inheritance taxes given Hunt is also announcing a clampdown on welfare spending and the move may be framed as helping the rich while taking from the poor.
Britain’s prime minister and chancellor have also been looking at cuts to income tax and national insurance, which is a form of payroll tax, a prospect that led the front pages of several Sunday newspapers. But Hunt was cool to the idea when questioned on the morning broadcast round, warning that he’s wary of any measures that might risk fueling rising prices.
“The one thing we won’t do is any kind of tax cut that fuels inflation,” Hunt said on Sky News, after the government claimed victory last week on its pledge to halve inflation when it fell to 4.6%. Hunt said he wanted to reduce the tax burden in a “responsible” way.
Hunt’s cautious language and reference to a “path” to a lower tax burden suggests he may promise a future income tax cut, an approach Sunak himself used as chancellor. In the spring of 2022, Sunak said he’d reduce income tax by a penny in 2024. Then, during his campaign to become Conservative leader, Sunak promised to reduce the basic rate of income tax to 16% by 2029, from 20%.
Another area where Hunt and Sunak have been considering tax-cutting options is around reducing stamp duty, a move that is seen as less inflationary than other potential measures.
Other policies Hunt is due to announce Wednesday include:
- Extending the so-called “full expensing” tax break for businesses, which gives firms 100% tax relief on capital spending to encourage investment and was due to expire in 2026
- A plan to speed up connections to Britain’s electricity grid and compensate people for having grid infrastructure built near their homes
- Extending support to hospitality firms and small businesses through business rates relief, but imposing higher tax bills on larger retailers and supermarkets
- £4.5 billion of funding for eight manufacturing sectors including cars and green industries
Hunt’s Autumn Statement has become all the more important for Sunak following his worst week as prime minister after a Supreme Court ruling against his flagship plan to send migrants to Rwanda sparked Tory divisions and back-biting reminiscent of the Brexit years. Sunak is on increasingly thin ice with many of his backbenchers and is looking to Hunt for a crowd-pleasing fiscal statement to stabilize his position.
--With assistance from Alex Wickham and Ellen Milligan.
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