By Elizabeth Piper and Alistair Smout
MANCHESTER, England (Reuters) -British finance minister Jeremy Hunt poured cold water on growing calls for tax cuts from within the governing Conservative Party on Monday, saying he could not commit to any “inflationary” reduction before the next election.
Before his speech at the party’s annual conference in the northern city of Manchester, Hunt was keen to announce a rise in the minimum wage for workers over 23 years old to at least 11 pounds ($13.42) an hour from 10.42 pounds.
But his message was overshadowed by calls from senior Conservative lawmakers, including Prime Minister Rishi Sunak’s predecessor, for tax cuts to try to close the gap in polls with the opposition Labour Party before an election expected next year.
It was the latest row over the direction of the party under Sunak, who hopes to use the conference to revitalise his year-old premiership by showing he is not scared of taking tough decisions to try to make people better off.
Seeking to lower the expectations of those who are pressing the government to offer voters tax cuts, Hunt told Times Radio: “I believe in lowering taxes but we don’t know whether that’s going to be possible before the next election at the moment.”
He said any tax cuts this year would be inflationary, making it more difficult to achieve Sunak’s pledge made in January to halve inflation by the end of the year.
“Do we want to move to lower taxes as soon as we can? Yes, but it means difficult decisions and we’re prepared to take those difficult decisions,” Hunt told Sky News, adding that voters understood “how difficult these decisions are”.
He also confirmed he would look again at the benefit sanctions regime to make it harder for people to claim welfare payments while refusing to take active steps to move into work, saying he wanted to treat other taxpayers “fairly”.
DIVISIONS
At a conference where government divisions were also on show over how to tackle illegal immigration, Sunak is hoping for a reset of sorts to rally a party which looks headed for a defeat in an election which must be held by January 2025.
He has narrowed the gap with Labour after announcing a watering down of climate policies to reach net zero targets, but many Conservative lawmakers and members in Manchester are resigned to losing, and some ministers are using the conference to show their potential to replace him.
What has not helped Sunak’s case among champions of traditional low-tax Conservative values is a report on Friday by the Institute for Fiscal Studies think tank that showed tax revenue was likely to represent 37% of annual economic output at the time of the next election – Britain’s highest tax rate since at least the 1950s.
While the British government’s tax take is high by historic standards at 33.5% of gross domestic product in 2021, it is well below that in other big western European countries which is nearer 40%, according to OECD figures.
But for Conservatives such as Liz Truss, prime minister for a chaotic six weeks last year, it was a sign that the governing party has lost its way as being fiscally responsible.
She will speak just over an hour before Hunt takes to the main stage and will say she wants the Conservatives “to be the party of business again” by reducing taxes and red tape.
“So ahead of this year’s Autumn Statement, we must make the Conservative Party the party of business once again, by getting Corporation Tax back down to 19%,” she will say, according to excerpts of her speech.
Hunt’s response was blunt: “I will have a very clear message for Liz Truss and, in fact, the whole country when I give my speech this afternoon.”
“There are no shortcuts. We have to take the difficult decisions to make it easier for companies to grow, we have to be much more efficient in the way that we’re spending taxpayers money including reforms to the welfare system.”
($1 = 0.8199 pounds)
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