British Finance Minister Jeremy Hunt has announced his commitment to responsible fiscal policies, asserting that he will not implement tax cuts that could exacerbate inflation.
This announcement comes just days before Hunt is set to unveil a significant budget update, known as the Autumn Statement, which is expected to include tax reductions.
In a bid to rejuvenate the stagnant British economy and bolster the fortunes of the governing Conservatives in anticipation of an upcoming election, Hunt has been contemplating measures such as lowering income tax or national insurance, as reported by the Sunday Times.
However, the Finance Minister is facing pressure from some Conservative lawmakers who have called for tax cuts in response to the opposition Labour Party’s substantial lead in opinion polls.
Hunt made it clear that while the government aims to alleviate the tax burden, it will do so in a responsible manner.
He emphasized that they will avoid implementing any tax cuts that might contribute to inflation, which recently decreased to 4.6% in October from 6.7% the previous month.
This aligns with Prime Minister Rishi Sunak’s commitment to halving inflation over the course of 2023.
In an interview with Times Radio, Hunt expressed his belief that the British economy has turned a corner and emphasized that his primary focus is on fostering growth.
He hinted that various options, including the possibility of cutting inheritance tax, are being considered, with “everything on the table” ahead of the Autumn Statement.
Labour’s finance spokesperson, Rachel Reeves, cautioned against prioritizing inheritance tax cuts during a cost-of-living crisis.
She suggested that lowering taxes for working individuals could be supported if the government provides a clear source of funding.
Hunt’s fiscal options are constrained by the substantial government spending during the COVID-19 pandemic and the surge in energy prices last year.
Public debt has now reached nearly 100% of economic output, a stark contrast to its size two decades ago.
Nevertheless, official forecasts anticipated for Wednesday are expected to reveal that Hunt has some fiscal leeway for giveaways without violating fiscal rules, compared to his annual budget in March.
Hunt stressed the importance of reducing the tax burden to foster a dynamic economy but also acknowledged that this process would not happen overnight.
While UK tax revenues are at their highest levels since the 1940s, the country’s tax rate remains lower than that of most other western European nations.
According to data from the Organisation for Economic Co-operation and Development in 2021, Britain’s tax rate is significantly lower than that of major European counterparts, such as France and Germany.