Rishi Sunak pledged on Monday (20) his readiness to “responsibly” reduce taxes after achieving his goal of halving inflation by year-end. However, he tempered expectations for the upcoming Autumn Statement budget scheduled this week, indicating that the government would not execute “everything at once.”
Amid mounting pressure from sections of the governing Conservative Party to use tax cuts to revive the party’s electoral fortunes, Sunak said that he intends to implement the next phase of economic growth by turning to taxation in a disciplined way.
There has been widespread speculation that chancellor Jeremy Hunt will be unveiling some tax measures when he delivers the Autumn Statement in the House of Commons on Wednesday (22).
“I want to cut taxes, I believe in cutting taxes, what clearer expression could there be of my governing philosophy than the belief that people, not government, make the best decisions about their money,” said Sunak, in a speech in north London.
“But doing that responsibly is hard. We must avoid doing anything that puts at risk our progress of controlling inflation, and no matter how much we might want them to, history shows that tax cuts don’t automatically pay for themselves,” he said.
Sunak said it wasn’t possible to “click my fingers and suddenly wish away” all the reasons that the country’s tax burden was so high in the first place because of the Covid pandemic and the Russia-Ukraine conflict.
“Now that inflation has halved and our growth is stronger, meaning revenues are higher, we can begin the next phase and turn our attention to cutting tax.
“We can’t do everything all at once. It will take discipline and we need to prioritise, but over time we can and we will cut taxes,” he noted.
Pushed for more details by reporters, the prime minister was categorical that he would not pre-empt the decisions that his chancellor is set to table in Parliament on Wednesday.
“We will prioritise, we will be disciplined and our focus is very much the supply side and growing the economy,” he added.
In a clear reference to his short-lived predecessor at 10 Downing Street, Liz Truss, who was forced out of office over an uncosted tax-cutting budget in September 2022, Sunak said he was determined not to make the “same economic mistake as last year’s mini-budget” and once again cautioned against “unfunded tax cuts”.
Over the weekend, Hunt told reporters that “everything is on the table” when asked about the growing speculation around possible tax cuts against the backdrop of inflation dropping to 4.6 per cent in the most recent analysis, halved from the double digits of last year when Sunak took charge, and the government’s tax receipts also higher than expected.
It has intensified pressure within the Tory ranks ahead of an expected general election in 2024 to implement tax-cutting measures that can lure the electorate back to the governing party, which has been languishing in the opinion polls behind the Opposition Labour Party.