U.K. Treasury chief Jeremy Hunt has stated that with the decrease in inflation, the government can now afford to lower taxes. However, he also mentioned that any tax cuts would be accompanied by a reduction in welfare benefits. Reports in the British media suggest that Hunt’s autumn budget statement, scheduled for Wednesday, will bring relief for businesses and wealthy property owners.
In an interview with the Daily Telegraph, Hunt expressed optimism about the British economy, stating that it had “turned the corner.” He emphasized that there is a path towards reducing the tax burden, and the Conservative government will take that path. He described the upcoming budget statement as a turning point for the economy, focused on growth.
Nevertheless, Hunt cautioned that reducing the tax burden would not be easy. He stressed the need for difficult decisions to reform the welfare state. The Conservative government, led by Prime Minister Rishi Sunak, has faced challenges in revitalizing the economy, exacerbated by the pandemic, Brexit, and Russia’s invasion of Ukraine. Additionally, the tax-slashing policies of Sunak’s predecessor, Liz Truss, have further complicated the situation.
Inflation reached a peak of 11% last year and stood at 4.6% in October, still above the Bank of England’s target of 2%. The economy is experiencing minimal growth, and many people are struggling to afford high food and energy bills.
With a national election scheduled for next year, the Conservative Party is currently trailing the opposition Labour Party by 15 to 20 points in opinion polls.
The potential tax cuts mentioned in the article include a reduction in corporation tax and a decrease in inheritance tax, which would primarily benefit the wealthy. Currently, individuals can pass on property worth £500,000 ($625,000) to their children or grandchildren before tax is imposed, enabling a couple to leave £1 million tax-free. Only around 4% of estates are subject to inheritance tax.
Hunt also emphasized the need for welfare system reform to encourage more people to return to work. The government plans to impose stricter penalties on individuals who are deemed fit to work but are not actively seeking employment, including removing their entitlement to free prescriptions for medication. The number of people out of the workforce due to physical or mental health reasons has increased significantly since the pandemic.
Ken Clarke, a former Conservative Treasury chief, expressed concerns about cutting inheritance tax, stating that it may appeal to the Conservative right but could draw severe criticism due to the vulnerable situation of poorer individuals in the country. He questioned whether the economic and financial state of the country justified such a move.
