Jeremy Hunt has said he must “double down” on high prices after admitting a package of pre-election tax cuts this autumn was looking unlikely.
The government would not make moves to “pump billions of additional demand” into the economy, the chancellor added.
The prime minister had previously pledged to halve inflation to about 5% by the end of the year but it has remained at 8.7%.
In an interview with the Financial Times, Hunt said achieving Rishi Sunak’s promise was “going to be more challenging than we thought”.
“We will not countenance tax cuts if they make the battle against inflation harder,” he said. “If we were to pump billions of pounds of additional demand into the economy when inflation is already too high, that would mean fiscal policy working against monetary policy.”
Hunt’s comments will concern Tory MPs, who have been pushing for tax cuts in the autumn statement in the run-up to next year’s general election.
The chancellor was speaking before his annual speech to the City of London on Monday, during which he will announce measures he hopes will grow the economy by making UK stock markets more appealing to firms seeking to float their businesses.
During the speech, he will also set out proposals to simplify rules for buying and selling shares and deliver higher returns for investors, as well as announcing a vision for a new kind of stock exchange allowing private companies to access markets without floating.
Hunt said: “These commonsense changes are grasping our newfound Brexit freedoms to simplify the rulebook – making it easier than ever for firms to research, raise funds, and float their business.”
The chancellor also said the government could resist “inflationary” public sector pay demands, while applying new pressure to companies, saying they ought to hold down prices and had “moral responsibilities to their own customers in a cost of living crisis”.
He said: “There are times when margin rebuild is legitimate and there are times when you need to think about the impact on your own customers.”
Cabinet ministers have been pushing Sunak to accept a 6% public sector pay rise recommended by the independent pay review bodies, the Times reported.
It is understood that the education secretary, Gillian Keegan, health secretary, Steve Barclay, defence secretary, Ben Wallace, justice secretary, Alex Chalk, and home secretary, Suella Braverman, are among the high-profile ministers lobbying Sunak.
Earlier this year the chancellor came under pressure from Conservative backbench MPs to unveil a raft of tax-cutting measures.
“We can’t wait until the next general election, people are depressed, we’ve got to give them hope,” said the backbencher Edward Leigh. “Corporation, personal, fuel tax – you’ve got to give them something.”
Another MP was reported to have told Hunt the Conservative party would face a “fin de siècle” – the end of an era – in government if people did not feel they had more disposable income.
The Tories continue to trail Labour in the polls, with recent modelling based on a mega-poll of new constituency boundaries suggesting Keir Starmer’s party are on course to secure a 140-seat majority in the next election.
With the Conservatives still suffering from a large polling deficit, Labour’s support was found to be at about 35% – 12% ahead of Sunak’s party.
