Rishi Sunak: The time has come to cut tax

3 minutes ago

About sharing

The PM says taxes can only be cut when inflation is under control and “that promise has now been met”

By Becky Morton & Henry Zeffman
Political reporter and chief political correspondent

Prime Minister Rishi Sunak has said the government is now able to cut taxes, after the pace of price rises eased.

Mr Sunak said his target of halving inflation had been met so taxes would be reduced in “a responsible way”.

He refused to comment on “speculation” about changes to individual taxes and said there would be more details in Wednesday’s Autumn Statement.

But the PM said the government could now move to “the next phase” of its plan to grow the economy.

Last week the government said it had met its pledge to halve inflation – the rate prices are rising – after the figure fell sharply to 4.6% in October.

The decrease was largely due to lower global energy prices, so there is a limit to how much credit ministers can take.

However, Mr Sunak said the government had taken “difficult decisions”, including avoiding inflationary pay rises in response to strikes, to deliver on its pledge.

“That’s why we can now can move on to the next phase of our economic plan and turn our attention to cutting taxes,” he said.

“We will do so seriously, we will do so responsibly, but that time is now here.”

In a speech at a London college, Mr Sunak acknowledged “we can’t do everything all at once”.

“It will take discipline and we need to prioritise,” he said. “But over time, we can and we will cut taxes.”

His comments all but confirmed tax cuts are coming in Wednesday’s Autumn Statement, when the chancellor sets out the government’s tax and spending plans for the year ahead.

The prime minister would not confirm where exactly tax cuts would be made.

However, Mr Sunak said he wanted to focus on “rewarding hard work”, which would suggest national insurance as the likeliest candidate.

He also said he wanted to “reform” the benefits system so “work always pays”.

This could mean increasing benefit payments by October’s inflation figure of 4.6%, rather than September’s higher figure of 6.7% as is convention.

While Chancellor Jeremy Hunt had considered cutting inheritance tax, sources said the focus of the Autumn Statement would be to promote growth – on which inheritance tax has minimal impact. Mr Hunt is likely to return to the issue for his Budget in the spring.

Instead, he appears to be weighing up direct cuts to income tax or national insurance.

There is also expected to be a focus on business taxes as cutting them is seen as key to helping the economy to grow.

Less than two months ago, Chancellor Jeremy Hunt had warned tax cuts this autumn would be “virtually impossible”.

However, inflation has come down faster than some in government feared it might and tax receipts have also been higher than expected.

This is partly a result of many people being dragged into higher tax brackets as a result of inflation and the freeze on personal tax thresholds – and means the government could have as much as £25bn to use for tax cuts.

Government sources expect those thresholds to remain frozen despite Conservative MPs’ complaints about this “fiscal drag”.

Related Topics

More on this story

4 hours ago
1 hour ago
3 days ago
2 days ago