Rishi Sunak promises to cut taxes as autumn statement looms
Rishi Sunak has promised he will cut taxes now the government has achieved its pledge to halve inflation by the end of the year.
The prime minister has been under pressure from many in his party to reduce the tax burden – which currently sits at a 70-year high – ahead of the next election, and rumours have been swirling that such policies could be announced in the autumn statement on Wednesday.
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Making a speech in north London on his economic plans, Mr Sunak said his “argument has never been that we shouldn’t cut taxes – it’s been that we can only cut taxes once we have controlled inflation and debt”.
And with the change in inflation – confirmed last week by the Office for National Statistics (ONS) to have dropped to 4.6% – it was time for the government to “begin the next phase” of its plan and “turn our attention to cutting tax”.
The prime minister did not reveal what taxes would be for the chop, but they are expected to be confirmed on Wednesday when Chancellor Jeremy Hunt delivers his statement in the Commons.
Can the chancellor lift the gloom? Watch live coverage on Sky News of the autumn statement from 11am on Wednesday.
During his speech, Mr Sunak celebrated the fall in inflation – though it still remains more than double the Bank of England target of 2% – saying it showed “when we make a major economic commitment, we will deliver it”.
Then moving on to the big question ahead of the autumn statement, he said: “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.
“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.
“And I can’t click my fingers and suddenly wish away all the reasons that taxes had to increase in the first place – partly because of COVID and Putin’s war in Ukraine, and partly because we want to support people to live in dignity in retirement with a decent pension and good health care which will cost more as the population ages.”
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But the prime minister added: “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.”
The prime minister said the government “can’t do everything at once”, and it would take “discipline” to “prioritise” what should be reduced.
However, he promised to make the reductions “in a serious, responsible way, based on fiscal rules”, adding: “Over time we can and we will cut taxes.”
Sunak’s argument has flaws – he’ll have to work hard to win it
Well, that was wild. Today, Rishi Sunak appeared to have perfected the art of the low-key big speech.
The prime minister announced tax cuts are coming right now, set out the five long-term priorities he’ll fight the election on and made his most aggressive attack on the Tory right’s belief in self-funding tax cuts.
All done on a hugely busy political day, competing with the COVID inquiry, CBI annual conference featuring the chancellor, an AI event with the deputy prime minister on the day a refreshed plan for foreign aid spending was being released and Lord Cameron’s formal arrival in the Lords.
At the heart of Sunak’s speech was an argument that having reduced inflation and debt, now everyone can share in the rewards. A prime minister – justifiably – wanting to share some of the credit for Wednesday’s tax cut announcement in the autumn statement.
This is his argument: “We could only cut taxes once we’ve controlled inflation and debt… and the official statistics show that promise has now been met.”
There are there problems with this statement from the prime minister. The first is that he has met only one, not both of his inflation targets – his government’s other is to get it back down to 2%, and at 4.6% it’s still very high by the standards of the last 20 years.
Secondly, debt is not going down – in absolute terms it is rising. Sunak means, but does not say, that debt is falling as a proportion of GDP, a slight of hand that matters.
Thirdly, he is boasting about growth, saying: “Our growth is stronger.” Yes, stronger than the March budget, but the last quarterly GDP figures came in at 0.0%, nil growth, and the latest indications from business point to all but no growth and maybe even recession in the coming months.
Instead what has changed is circumstance – the election, even at its furthest away point, is getting closer, while his colleagues are circling on a range of topics and he feels more unstable than at any point since the start of the year after the Rwanda court defeat.
This is an argument he is going to have to work very hard if he wants to win.
Read more:
What chancellor could announce in autumn statement
Over the weekend, Mr Hunt insisted the focus of the upcoming budget would be on growth for business, telling Sky News he wanted to help create a “productive, dynamic, fizzing economy”.
But the chancellor also said “everything is on the table” when asked about swirling rumours over possible tax cuts.
Sky’s deputy political editor Sam Coates understands taxes on personal incomes will fall in Wednesday’s statement, as the government also seeks to help households with the cost of living crisis.
In the latest edition of the Politics at Jack and Sam’s podcast, by Sky News and Politico, he said the cut was unlikely to be on the basic rate of income tax though.
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However, the head of the Institute for Fiscal Studies, Paul Johnson, warned there was “no headroom there at all” for major tax cuts.
The economist said chancellors could “always find a few billion in a budget or an autumn statement if they want to”, but the public finances were “in such a mess” due to the amount being spent on debt interest, that there wasn’t a lot of wriggle room for Mr Hunt.
During his speech, Mr Sunak also promised to “clamp down” on welfare fraudsters, calling it a “national scandal” and “an enormous waste of human potential” that around two million people of working age were not in employment.
The government is said to be considering a big squeeze on benefits in order to find savings, effectively cutting working age welfare payments for millions of people.
The prime minister said: “We believe in the inherent dignity of a good job, and we believe that work, not welfare is the best route out of poverty.
“So we must do more to support those who can work to do so, and we will clamp down on welfare fraudsters because the system must be fair for taxpayers who fund it.”
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Chancellor: ‘Tax burden is too high’
Mr Sunak also used his speech to launch an attack on Labour for having “no experience” in business, and accused Sir Keir Starmer and the shadow chancellor Rachel Reeves of offering “fairy tale” answers to the questions of how to grow the economy.
But Labour’s national campaign coordinator, Pat McFadden, said: “The Tories have failed to deliver on so many pledges from the past. Why should people believe they will deliver on pledges for the future?
“It sums up this Conservative Party to claim things will be better tomorrow when they can’t even fix the problems of today.”
Around 1,500 homes and businesses are still without power after heavy snow caused major power cuts in Cumbria.
It came as much of the country was hit by cold and wet conditions over the weekend, including a low of -12.5C recorded in northern Scotland overnight.
Freezing conditions are forecast to continue on Monday and the Met Office has issued new yellow weather warnings for snow, ice and rain.
Cumbria was one of the worst affected regions over the weekend, with up to 30cm of snow falling in places.
Officials declared a major incident in the county on Saturday and advised people not to travel unless necessary.
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Cumbria residents seek refuge in church
Dozens of motorists in the Lake District were forced to abandon their cars overnight. Many were forced to seek refuge in local community centres, primary schools and a church.
Electricity North West said its engineers had been “battling treacherous conditions” throughout the weekend and were still working on restoring supplies on Sunday evening.
Another 7,500 homes and businesses have been reconnected after earlier being hit by power cuts.
Check the five-day forecast for your area
Weather warnings for Monday. Pic: Met Office.
The weather also caused disruption to travel, including at East Midlands Airport, which was forced to temporarily close its runway on Sunday.
It came after some flights were cancelled at Glasgow Airport and London Stansted Airport on Saturday.
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The Met Office’s new weather warnings include alerts for ice across much of northern England and parts of the Midlands, as well as snow for higher areas of Wales and the Peak District.
The weather agency said there was a risk that snow will lead to major travel disruption and there could be “accumulations of 2cm to 5cm on some roads above around 150m, and perhaps 10cm to 15cm on roads above around 350m”.
The warning runs from Sunday evening until 12pm on Monday.
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Weather causing chaos in Cumbria
The Met Office also issued a yellow weather warning for rain across parts of southern Wales and southwest England, with the alert due to come into force from midnight and run until 6pm on Monday.
Forecasters said there was a risk of flooding to some homes and businesses, as well as potential disruption to train and bus services.
The RAC warned northern parts of the country were facing an “ice rink on Monday as snow refreezes overnight” and advised motorists to take care.
Spokesperson Simon Williams said: “We’re expecting some very treacherous icy conditions in northern parts, so those who have to drive should exercise great caution.
“If it’s possible to delay or even abandon journeys that may well be the best option.”
However, Met Office meteorologist Tom Morgan said the weather would likely become milder later in the week.
He added: “So there is an end in sight to the wintry weather.”
UK
Rishi Sunak suggests more tax cuts are on the way – but refuses to commit to triple lock manifesto pledge
Rishi Sunak has suggested more tax cuts are on the way because the economy has “turned a corner”.
The prime minister told reporters that while he would not comment on specifics, trimming taxes was “the direction of travel from this government”.
But it came as he refused to say if the pensions triple lock would be in the next Conservative Party manifesto – despite Downing Street insisting in September that it was “committed” to the policy.
Mr Sunak’s comments echo similar remarks by his ministers in recent weeks.
Chancellor Jeremy Hunt also said last month that the economy had “turned a corner” just before he unveiled a cut to National Insurance in the Autumn Statement.
However, four million people could also end up paying higher taxes if their wages rise after the government decided to continue the freeze on tax thresholds.
Reports suggest the Conservatives are considering additional cuts in 2024 as the party tries to woo voters and reduce Labour’s 20-point lead in opinion polls ahead of the next general election, which must take place by January 28 2025.
Cuts to stamp duty and inheritance tax are among the options reportedly being looked at by ministers.
When asked about the two policies, Mr Sunak said: “I would never comment on specific taxes. But what I will just say, though, is we have turned a corner.
“We have got inflation down, as I said we would, we have grown the economy and we are now focused on controlling spending and controlling welfare so we can cut taxes. So when we can do more, we will.”
He added: “We want to grow the economy, we want to reward people’s hard work and aspirations and cut their taxes responsibly. That is the direction of travel from this government.
“If you want controlled public spending, controlled welfare and your taxes cut, then vote Conservative.”
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Mr Sunak was unable to make similar promises about the triple lock, which ensures the state pension must rise every April by whichever is highest out of average earnings, inflation or 2.5%.
The policy has come under fire in recent months by critics who claim it has become too expensive and gives the government less financial “headroom” to deal with economic shocks.
Some senior Tories have called for it to be scrapped and Labour has refused to guarantee the triple lock will remain in place if it wins the next election.
While the government continued with the policy in its recent Autumn Statement, ensuring the state pension will rise by 8.5% in April 2024 to £221.20 a week, Mr Sunak refused to be drawn when asked directly if it would be in the next Tory manifesto.
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Analysis: Autumn Statement 2023
Speaking to journalists as he flew between the UK and Dubai for the COP28 summit, he replied: “[I’m] definitely not going to start writing the manifesto on the plane, as fun as that would be.”
Mr Sunak acknowledged there had been “some scepticism” about if policy was going to form part of the Autumn Statement, but said its inclusion had been “a signal of our commitment to look after our pensioners who have put a lot into our country”.
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