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Rishi Sunak has reportedly indicated that he may announce reductions in personal taxes during the autumn statement this Wednesday.
During a significant address on Monday, the prime minister stated: “You can have confidence in my words when I say we can begin to responsibly reduce taxes.”
His remarks followed widespread speculation over the weekend that chancellor Jeremy Hunt will likely announce a reduction in income tax or national insurance.
The intention is to increase declining Tory popularity in polls – and to put pressure on Sir Keir Starmer to declare whether a future Labour leader would overturn this action.
In a speech commemorating the halving of inflation, which he had pledged to do earlier in the year, Mr. Sunak stated that the government can now focus on reducing taxes.
The Prime Minister hinted at a reduction in personal taxes by stating “we will incentivize work” and promised to implement strategies to stimulate economic growth.
He also expressed his support for reducing taxes in a cautious and responsible manner, cautioning against making unrealistic promises. He emphasized the importance of being disciplined and prioritizing in order to achieve our goals.
Over the weekend, there were reports that Mr. Hunt was contemplating a surprising decrease in income tax. However, on Sunday, the chancellor made it clear that he did not want to provide a tax reduction that would contribute to inflation.
According to The Times, reducing national insurance may be more probable than decreasing income tax. Treasury officials believe this approach would be more cost-effective and have less impact on inflation.
The Independent understands that a controversial cut to inheritance tax is now off the table, pushed back until at least next year. A government source said any tax cuts announced on Wednesday would focus on a supply side measures to boost economic growth – something an inheritance tax cut, a levy on wealth, does not do.
The Spring Budget is quickly approaching and Mr. Sunak is facing immense pressure from various factions within the Tory party to reduce inheritance, personal, and business taxes. Some MPs are pushing for immediate action in order to boost the party’s popularity before the expected autumn 2024 election.
The leader of the Tory party also suggested that allowing Labour to control the UK economy would be equally risky as having Liz Truss as the head of the economy. This is a reference to last year’s unsuccessful attempt to implement tax cuts without proper funding, which resulted in a disastrous mini-budget.
He stated that Keir Starmer and Rachel Reeves were in favor of maintaining the “big spending strategy”, citing the opposition’s £28 billion plan for green businesses.
“Illogically, this repeats the economic error of last year’s mini-budget – recklessly allocating tens of billions of pounds towards unfinanced expenditures is equally as risky as allocating tens of billions of pounds towards unfinanced tax reductions,” stated Mr. Sunak.
Prominent Conservative member John Redwood, who is known for his stance on lowering taxes, has expressed support for the proposal to decrease income tax. The right-leaning politician stated, “Any reduction in taxes is preferable to none.”
Mr. Redwood expressed a preference for reducing income tax instead of implementing a national insurance option, as stated in The Independent. According to him, people have stronger negative feelings towards income tax and are more aware of it. He believes that, in order to boost confidence, it would be beneficial to take actions that make people feel positive.
It is anticipated that Mr. Sunak and Mr. Hunt will reduce benefits on Wednesday, which is likely to cause anger from charities and opposition groups.
The government officials planned to utilize the inflation rate from September to adjust benefits, resulting in a 6.7% increase. However, Mr. Hunt has the option to use the significantly lower inflation rate from October, which is 4.6%. According to the Resolution Foundation’s analysis, this could result in families losing £500 annually due to the decrease in benefit payments.
Stephen Hammond, a prominent member of the Conservative party and deputy chair of the One Nation group, cautioned against reducing benefits.
According to Mr Hammond, it is important to honor our promises to increase benefits. We should not use the decrease in inflation as an excuse to deviate from our initial commitment.
On Monday, Mr. Sunak expressed concerns about the welfare system’s current sustainability. The government is gearing up to implement a new plan that will target individuals who do not engage with their jobcentre, which could result in the loss of payments and access to dental care.
The chancellor is expected to address calls from Tory MPs to decrease corporation tax. Additionally, they are also anticipated to reduce business levies by expanding the “expensing” program, which allows businesses to deduct investments from their corporate tax.
David Jones, a member of Parliament for the Conservative Party and deputy leader of the European Research Group, advised Mr. Hunt to prioritize reducing inheritance and corporation taxes. Jones believes that stimulating economic growth should be a priority, and suggests that cutting corporation tax, which has fluctuated in the past, would be an effective method.
Paul Johnson, the director of the Institute for Fiscal Studies (IFS), stated that the chancellor will only be able to make small reductions in taxes on Wednesday.
The esteemed economist stated on Times Radio that implementing tax reductions would require “extremely stringent budgeting” which may include reductions in government-funded services.
Despite claims that Mr Hunt has increased fiscal flexibility by approximately £25 billion, the director of the IFS stated that the bleak debt situation in Britain leaves little room for maneuvering.
Mr. Johnson stated that there is much speculation about having more flexibility in dealing with his unusual goal. However, that is not true.