The Prime Minister has promised to cut tax in a “responsible way” after he has met his target to half inflation, ahead of the autumn statement.
Rishi Sunak did not reveal and specifics over how the tax burden will be reduced, but he did say it will done “carefully and sustainably.”
The Prime Minister said in a speech at a London college, “We will do this in a serious, responsible way, based on fiscal rules to deliver sound money, and alongside the independent forecasts of the Office for Budget Responsibility.
“And we can’t do everything all at once. It will take discipline and we need to prioritise.
“But over time, we can and we will cut taxes.”
Sunak added, “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.
“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 head of the Institute for Fiscal Studies, Paul Johnson, warned there’s “no headroom there at all” for the Chancellor to introduce major tax cuts due to the state of public finances.
The head of the IFS added, “At the budget back in March [debt was forecast to be] falling by £6bn in five years.
“Now, £6bn in five years out of a £1tn budget is nil. I mean, there is no headroom there at all… and that’s probably roughly where he’s going to be still [on Wednesday].”
Johnson said that the Chancellor “can always find a few billion in a budget or an autumn statement if they want to,” but he cautioned public finance are “in such a mess.”