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Rishi Sunak has promised to start cutting taxes, as he laid the ground for this week’s Autumn Statement and set battle lines for the next UK general election.
The prime minister raised hopes that chancellor Jeremy Hunt would announce cuts to personal taxation on Wednesday but said any reductions would have to be made in a “sustainable” way.
Tory MPs want Hunt to cut income tax or national insurance rates in his Autumn Statement, partly paying for any reductions through a cut in welfare spending.
Sunak said that the latest official data showed that inflation was under “control”.
Speaking in Enfield in north London, he said: “That’s why we can now move on to the next phase of our economic plan and turn our attention to cutting taxes,” adding: “We will do so seriously, we will do so responsibly, but that time is now here.”
Labour believes that Hunt will use the Autumn Statement to announce welfare cuts while reducing taxes for working people, in the hope of drawing a political dividing line between the two parties.
The Treasury declined to comment on tax cuts, but Sunak last year talked about cutting the basic rate of income tax from 20p to 19p in the pound in 2024, before eventually cutting it to 16p later in the decade.
Office for National Statistics data out last week showed that inflation in October slowed more sharply than expected to 4.6 per cent, meeting Sunak’s objective of halving inflation this year. That is still, however, more than twice the Bank of England’s 2 per cent target.
The prime minister also gave a foretaste of how the Tories would campaign ahead of the general election, which is expected at some point next year.
He attacked Labour’s pledge to invest up to £28bn a year in green projects. “Do you want a government that is committed to bringing down borrowing and debt and controlling spending so that we can cut taxes; or do you want a government that is committed to borrowing £28bn?” he said. “There’s no way if you borrow £28bn more that you’re going to cut people’s taxes.”
Labour, which is leading the Tories by more than 20 points in opinion polls, has diluted its original £28bn-a-year spending commitment by indicating it would only be hit by the end of the next five-year parliament and would include existing green capital spending of about £8bn annually.
Sunak said he had shown in his time in government that he was not a “market fundamentalist” — for example creating the furlough job support scheme during the Covid pandemic — but he said he did not want “permanently bigger government”.
He added: “The path to prosperity lies not in ever more government intervention but in creating the conditions for businesses to thrive.”
His comments came as a cross-party group of former business secretaries wrote to Hunt urging him to launch a “clear science and industrial strategy” at the Autumn Statement.
Conservative MP Greg Clark, Labour peer Lord Peter Mandelson and former Lib Dem leader Sir Vince Cable said such a strategy would allow the chancellor to leverage the UK’s science and research base to turbocharge productivity.
In their letter, the trio argued that investors would respond to an industrial strategy that “brings together founders, companies, researchers, government departments and local leaders to create the best conditions to turn discoveries into jobs”.
They added that “building agreement across parties can give confidence to investors making long term decisions” ahead of the next general election.
Their message was endorsed by Sharon Todd, chief executive of the Society of Chemical Industry, who said an industrial and science strategy was “vital for the UK economy”, adding: “Every other G7 country has proper plans in place.”
Sunak ditched Britain’s sweeping industrial strategy when he was chancellor in favour of focusing on five specific sectors — digital technology, creative industries, advanced manufacturing, green industries and life sciences.
One Whitehall official argued that specific strategies for key sectors of the economy that “go into minute detail” were more helpful than a “broad overview” set out in a “glossy document”.
The government insider highlighted that Hunt had announced £4.5bn for UK manufacturing last week and is publishing an advanced manufacturing plan on Wednesday.