LONDON (AP) — U.K. Treasury chief Jeremy Hunt says the government can afford to lower some taxes now that inflation is falling, but that any cuts will come along with a squeeze on welfare benefits.
British media have reported that there will be relief for businesses and wealthy property-owners in Hunt’s autumn budget statement on Wednesday.
Hunt told Saturday’s Daily Telegraph newspaper that the British economy had “turned the corner.” He said that “there is a path to reducing the tax burden, and a Conservative government will take that path.”
“Without preempting the decisions that the prime minister and I make, this is an autumn statement for growth. It’s a turning point for the economy,” Hunt said.
But he cautioned to broadcasters on Saturday that “there’s no easy way to reduce the tax burden. What we need to do is take difficult decisions to reform the welfare state.”
Prime Minister Rishi Sunak’s Conservative government has struggled for the past year to bolster an economy burdened by a cost-of-living crisis — fueled by the pandemic, Brexit and Russia’s invasion of Ukraine – and roiled by the rash tax-slashing policies of Sunak’s predecessor, Liz Truss.
Inflation topped 11% late last year. It stood at 4.6% in October, still above the Bank of England’s 2% target. The economy is barely growing and millions are struggling to pay high food and energy bills.
With a national election due next year, the Conservatives are stuck 15 to 20 points behind the opposition Labour Party in opinion polls.
The most likely tax cuts are a reduction in corporation tax and slashing inheritance tax, a move that would help the wealthy. Individuals currently can pass property worth 500,000 pounds ($625,000) to children or grandchildren before tax is levied, meaning a couple can leave 1 million pounds tax free. Only about 4% of estates have to pay inheritance tax.
Hunt also said the government needs to reform the welfare system to get more people back to work. The government has announced it will increase penalties for people who are deemed fit to work but aren’t looking for jobs, including removing their free drug prescriptions. The number of people not in the workforce for physical or mental health reasons has soared since the pandemic.
Ken Clarke, a former Conservative Treasury chief, said cutting inheritance tax “might appeal to the Conservative right, but it leaves them open to the most appalling criticisms when inflation and the state of affairs is making poorer people in this country very vulnerable indeed.”
“I’m not sure that the economic and financial state of the country justifies it.”