24 May 2023

Hunt rules out tax cuts amid efforts to cut inflation

24 May 2023

Chancellor Jeremy Hunt appeared to rule out tax cuts in the near future as he stressed the need to tackle inflation.

His comments came as the latest figures from the Office for National Statistics (ONS) showed Consumer Prices Index inflation fell to 8.7% in April, down from 10.1% in March.

The easing in inflation has been welcomed, but concerns remain about rising food prices.

Mr Hunt, who was interviewed at the Wall Street Journal CEO Council summit, dashed the hopes of some backbench Tory MPs as he signalled the current high-inflation environment was not amenable to cutting taxes.

“What is a tax cut? A tax cut is putting money in people’s pockets so they can spend more. The biggest way that I can put money in people’s pockets so they have more to spend is to halve inflation because that is eroding 10% of the value of people’s pay packets or has been over the last year.

“So right now, to reflate the economy with further stimulation would mean that monetary policy and fiscal policy were pointing in opposite directions.

“That would be the wrong thing to do.

“If we want to cut taxes in the long run, as all conservatives want to do, because I believe in a low-tax economy, number one task is to get inflation down.”

Mr Hunt spoke a day after the International Monetary Fund’s managing director Kristalina Georgieva gave a frosty reception to the prospect of tax cuts in the UK.

The Chancellor also indicated that some form of direct intervention to tackle the rising cost of food was not among the options being considered by the Treasury.

“We’re doing everything we can to help families and we will continue to try and support people but the one thing we won’t do are measures that mean that inflation becomes more persistent or sticky,” he said.

“That’s why yesterday I had the food producers into Downing Street. We’ve also been talking to the supermarkets, the farmers, looking at every element of the supply chain and what we can do to pass on some of the reductions in costs that are now beginning to come through to consumers as quickly as we can.”

Mr Hunt also appeared to rebuff suggestions that elements of the UK-EU Brexit deal could be re-opened or revised, amid car industry concerns over new rules covering electric vehicles (EVs) that come into effect at the start of 2024.

It comes after Vauxhall’s parent company Stellantis told MPs it would be unable to keep a commitment to make EVs in the UK without changes to Britain’s agreement with the bloc.

“We will be totally proactive in talking to all our leading manufacturers, talking to our friends in the EU, about how to make things work for EU manufacturers and British manufacturers to mutual advantage,” Mr Hunt said.

“But we can do that without changing the fundamentals of the deal, which I think is the right foundation.”

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