Jeremy Hunt downplayed the possibility of immediate reductions in income taxes, assuring that no actions will be taken in this week’s autumn statement that could contribute to inflation.
Some members of the Conservative party are pushing for policies that would have an immediate impact on families, but the chancellor stressed the importance of promoting economic growth and stated that tax reductions would not be implemented immediately.
There is a contentious proposal to reveal a reduction in inheritance tax on Wednesday, potentially causing backlash from Conservative MPs in vulnerable constituencies in less affluent regions. This option is still being considered, but it is uncertain if the plan of announcing corporate tax cuts and suggesting a plan to decrease income tax in the upcoming budget will satisfy the rebellious MPs.
In an interview on Sky News, Hunt stated that the one action we will not take is implementing a tax cut that contributes to inflation. We have put in a lot of effort to control inflation and we do not want to undo that progress.
There are concerns that reducing inheritance tax could lead to criticism from Conservative Members of Parliament in the northern “red wall” who are advocating for income tax reductions to assist low-income families.
Hunt’s colleague in the cabinet, Michael Gove, explicitly urged for a reduction in income tax before the upcoming general election.
According to sources from the Labour party, they will not propose raising taxes for the next election, so if Hunt announces a decrease in income tax, they will not promise to undo it.
The Guardian has knowledge that they would oppose any reduction in inheritance tax, asserting that only the top 4% of individuals pay it, and would likely repeal it if in a position of power.
Rachel Reeves, the shadow chancellor, stated to the BBC that reducing inheritance tax during a time of high living expenses and struggling public services is not the appropriate focus. She recognizes the desire for individuals to leave their hard-earned assets to their children, but currently, it is not a beneficial decision and our support cannot be given.
According to Labour, the data they have released suggests that reducing inheritance taxes would primarily benefit a small group rather than the majority.
In 2020-21, approximately 27,000 estates were subject to inheritance tax. Data revealed that 1,684 of these estates were located in constituencies represented by current cabinet members. In contrast, only 267 estates in “red wall” constituencies, which were won by the Conservative party in the 2019 general election, paid inheritance tax.
Hunt has additional financial flexibility due to larger-than-anticipated revenues from VAT and income tax. It is possible that he may rely on stricter welfare spending and increased productivity in public services.
Last week, Hunt elaborated on a caution that individuals receiving welfare benefits who do not cooperate with their jobcenter or accept available job opportunities may face losing their benefits.
“We believe it is reasonable to state that if you do not participate in this procedure at all, and if you remain uninvolved for a period of six months, we will terminate your case and discontinue your benefits. I believe that this is what taxpayers would anticipate.”
The September inflation rate is typically used by ministers to adjust working-age benefits, resulting in a 6.7% increase. However, the chancellor may also consider using this October’s inflation rate of 4.6%, which could potentially save £3 billion in spending. This decision would primarily impact households receiving disability or means-tested benefits, according to the Institute for Fiscal Studies (IFS).
According to Torsten Bell, the CEO of the Resolution Foundation, Hunt’s actions are being carried out in a broader context where taxes are already at a high level in comparison to past years. This suggests that any potential cuts would likely be minor.
He stated that in order to have more flexibility, the economy needs to grow at a faster rate. However, when examining indicators like business surveys and customer receipts, it is evident that the economy is not performing well.
“The director of IFS, Paul Johnson, stated that reducing inheritance tax would be a peculiar indication of priorities.”
Regarding welfare benefits, he acknowledged the chancellor’s perspective, but noted that the system for those without employment may be considered the harshest in Europe.
The speaker stated that the unemployment benefits have not increased in value for over 50 years, while earnings have risen by two and a half to three times. As a result, the benefits are significantly lower compared to earnings than they used to be.