Jeremy Hunt has signalled that he is ready to announce tax cuts in his autumn statement, as he considers cutting inheritance and business taxes while squeezing benefits by billions.
The chancellor said that now is a “turning point for the economy” and that “this is the moment” to go for growth ahead of Wednesday’s big announcement.
Mr Hunt is thought to be considering slashing inheritance tax – a proposal criticised for helping the rich while others struggle with the high cost of living.
Campaigners warning that it would be “the most stupid” tax cut to offer, and would increase inequality by offering the already-wealthy a major boost.
The chancellor also suggested he was ready to squeeze benefits next week and penalise some claimants, saying he was set to make “difficult decisions” on welfare reform.
Former deputy PM Michael Heseltine and other senior Tories have condemned plans including stripping the right to free prescriptions from benefits recepients who don’t look for work – warning that they risk descending into the politics of “hate”.
In a sign he will go with tax cuts next week, Mr Hunt told The Telegraph: “Without pre-empting the decisions that the prime minister and I make, this is an autumn statement for growth. It’s a turning point for the economy.”
He said the country has “turned the corner in a big way” after Rishi Sunak’s pledge to halve inflation was met this week. Asked if now was the time to go for economic growth, Mr Hunt said: “Yes, absolutely. This is the moment. We’ve got to go for it as a country and I think we’ve got a big, big opportunity.”
Typically, ministers use the September figure for inflation when uprating working-age benefits, which would mean a 6.7 per cent hike. But Mr Hunt has not ruled out using October’s far lower figure of 4.6 per cent.
Jeremy Hunt and Rishi Sunak face pressure to cut taxes— (PA Archive)
Grilled by broadcasters on Saturday, Mr Hunt said that “difficult decisions to reform the welfare state” are needed as he considers squeezing benefits by billions while slashing inheritance tax.
On the possibility of tax cuts, the chancellor gave little away, saying: “When it comes to tax, I know there’s been a lot of speculation, we will not do anything that compromises the battle against inflation.”
He said halving inflation – achieved this week – was the “single-most important thing we’ve done and we will not do anything to jeopardise the progress”.
There are hopes the final forecasts from the Office for Budget Responsibility will give Mr Hunt more “fiscal headroom” than expected to make tax cuts when he receives them on Friday.
The options for cutting inheritance tax – which is charged at 40 per cent on estates of more than £325,000, with an extra £175,000 towards a main residence passed to direct descendants – include reducing it by 50 per cent, 30 per cent or 20 per cent, according to The Times.
The Tories are said to then be considering making abolishing it entirely an election manifesto pledge next year – which could cost £7bn a year in the short term. However, the Institute for Fiscal Studies forecast that scrapping the tax could cost more than £15bn a year by 2033.
Jeremy Hunt thought to be considering cutting inheritance tax— (Copyright 2023 The Associated Press. All rights reserved)
Torsten Bell, head of the Resolution Foundation think tank, questioned the idea of cutting inheritance tax while leaving income tax so high.
The economist pointed out that “you can currently inherit almost four average-priced homes tax free” at the threshold of around £1m.
Mr Bell asked on X, formerly known as Twitter: “Even if you think lower inheritances taxes are desirable, are they more desirable than not whacking up taxes on income quite so much?”
Asked about the possibility of an inheritance tax cut, Lord Clarke told Times Radio: “Well, it’s not the tax cut I would choose. Indeed, I’m not sure he’s got any room for tax cuts.”
Mr Hunt and Mr Sunak are also facing a furious reaction to a “cruel” welfare crackdown amid efforts to get people back into work under a toughened sanctions scheme.
Free prescriptions, dental treatment and legal aid will be cut off for benefit claimants who are deemed fit to work and do not seek employment.
Lord Heseltine told The Independent that the “last thing anyone should do is attack people on health grounds”, adding: “I’m wary of zealots’ interests welling up into hate politics – they need to be careful.”
Mr Hunt is also said to be considering an extension to the “full expensing” scheme, which allows businesses to claim back up to 25p for every £1 of investment. It could cost around £10bn a year to keep it in place indefinitely.
