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Britain’s Prime Minister Rishi Sunak promised on Wednesday that he would cut taxes once inflation was under control, following mounting concerns from Conservative Party members about a rise in tax levels since the COVID-19 pandemic.
“I know you want tax cuts. I want them too and we will deliver them. But the best tax cut we can give people right now is to halve inflation and ease the cost of living,” Sunak told the Conservatives’ annual conference in Manchester.
Throughout this year, Sunak and his finance minister Jeremy Hunt have said their priority is to halve inflation – which hit a 41-year high of 11.1% in October 2022 – and that tax cuts risked delaying this.
However, many party members are impatient for tax cuts ahead of a national election which is likely next year, especially as the Conservatives are heavily lagging the opposition Labour Party in opinion polls.
On Friday, the Institute for Fiscal Studies, a non-partisan think tank, said tax revenue was likely to represent 37% of annual economic output at the time of the next election, up from 33% at the time of the last election in December 2019.
This would be Britain’s highest tax rate since at least the 1950s, although below most other similar European economies.
Hunt said on Monday that he would freeze the number of civil servants, which rose during the pandemic, after ruling out near-term tax cuts in a newspaper interview published on Saturday.
Inflation was 6.7% in August, and the Bank of England forecasts it will fall to 4.9% in the final quarter of next year and reach its 2% target in the second half of 2025.
Hunt will present updated economic forecasts and budget plans on Nov. 22.
Source: Reuters
