British Finance Minister Jeremy Hunt rules out short-term tax cuts

MANCHESTER, ENGLAND — U.K. Finance Minister Jeremy Hunt on Monday ruled out tax cuts in the short-term, arguing that to reduce them now would be inflationary.

“Right now we’re focused on bringing down inflation,“ Hunt said on the second day of the Conservative Party Conference currently underway in Manchester, England. “The plan is working,” he added. “And now we must see it through, just as Margaret Thatcher did all those years ago.”

Hunt has previously argued that tax cuts are “virtually impossible,” and could only be afforded if the government took some “difficult decisions.”

The comments mark a continuation of the status quo after Hunt was installed last year to steady the ship following then-Prime Minister Liz Truss’ cataclysmic mini-budget. It also signals what may be to come when the chancellor delivers his Autumn Statement next month.

His words come despite clamor from within the ruling Conservative Party to reduce taxes before a General Election next year, when the Tories are set to face a tough battle against the opposition Labour Party.

Truss herself delivered such demands on the fringes of the conference Monday. She called on the chancellor to cut corporation tax back down to 19% from the current 25%, adding “if we can get it lower, the better.”

In an effort to refocus discussions, Hunt unveiled a series of policies including a pledge to raise the national living wage to £11 an hour ($13.40), up from £10.42. The move meets a 2019 manifesto commitment to increase pay for the lowest paid.

“That’s a pay rise for 2 million workers,” he said. “Because if you work hard, a Conservative government will always have your back.”

Hunt also unveiled plans for tougher benefit restrictions in a bid to make savings on the government’s welfare bill. The move is expected to form part of wider plans due to be announced next month to get more people into work.

Additionally, he said he would freeze the expansion of the civil service and implement a plan to reduce staff numbers to pre-pandemic levels.

British Prime Minister Rishi Sunak faced flack as the conference kicked off Sunday after telling the BBC that reducing inflation was the best tax cut he could offer.

“Inflation is a tax. It’s a tax that impacts the poorest people the most,” he said. Inflation — the rate at which the cost of goods and services rise — is not a tax, though it can function as such, with higher prices eating into people’s spending power.

Hunt sought to clarify the prime minister’s comments Monday, saying that reducing inflation would be a “boost to incomes,” ensuring that take-home pay is higher than it would be otherwise.

Sunak has positioned halving inflation to around 5% as one of his key priorities for 2023. As of August, U.K. inflation fell to 6.7%, slightly lower than the 7% economists had predicted, signaling that the sharp pace of price rises may be easing.

The fresh data prompted the Bank of England to take a pause in its run of 14 consecutive interest rate hikes, holding rates steady at a 15-year high of 5.25%.

On Friday, data revisions from the Office for National Statistics showed that the U.K. economy bounced back from the Covid-19 pandemic much faster than previously estimated. Britain is no longer the worst performer in the G7, ranking similar to France and stronger than Germany.

“Don’t bet against Britain,” Hunt said, referencing the ONS data. “It’s been tried before and it never works.”