UK chancellor Jeremy Hunt has told small-state Conservative MPs they will have to wait for tax cuts, as the government seeks to head off backbench pressure for cuts this year.
In response to calls for tax cuts now from Liz Truss, the former prime minister, and other Tory rightwingers, Hunt said on Friday that “the best tax cut right now is a cut in inflation”.
He added that in the long run “we need lower taxes”, but argued this would mean spending restraint by the government.
The insistence of the Tory right that tax cuts are needed in April’s Budget has exasperated Hunt and Prime Minister Rishi Sunak, whose strategy is to stabilise the economy and bring inflation under control.
“Risk-taking individuals and businesses can only happen when governments provide economic and financial stability,” the chancellor said in a speech at Bloomberg in the City of London, an apparent reference to the implosion of the Truss government’s debt-funded £45bn tax-cutting mini-Budget last year.
Hunt said that inflation was still far too high but was nevertheless lower than in 14 EU countries, with interest rates rising more slowly than in Canada or the US.
The chancellor acknowledged that Britain had not returned to its pre-pandemic employment or output levels but emphasised that unemployment was still at its lowest level for half a century.
“Our growth was slower in the years after the financial crisis than before it but since 2010, the UK has grown faster than France, Japan and Italy,” he said.
Setting out what he said was the ambition “to turn the UK into the world’s next Silicon Valley”, Hunt hailed the success of industries such as offshore wind and technology.
“But like any business embracing new opportunities, we should also be straight about our weaknesses,” he added. “Structural issues like poor productivity skills gaps, low business investment, and the overconcentration of wealth in the south-east have led to uneven and lower growth.”
In the wake of the controversy about Conservative chair Nadhim Zahawi’s payment of a penalty to settle a tax dispute with HMRC, Hunt initially resisted responding to questions about his own tax affairs.
He later said: “I don’t normally comment about my own tax records but I’m chancellor so for the record I have not paid an HMRC fine.”