Sunak pins hopes on ‘Thatcher’ tax package

PM aims to revitalise premiership with series of cuts in run-up to next election




Daily Telegraph

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RISHI SUNAK will use the Autumn Statement tomorrow to kickstart a Thatcherite tax-cutting drive as he attempts to revive his premiership. The Prime Minister has been considering plans to cut National Insurance, raise the 40 per cent income tax threshold and reduce inheritance tax between now and the general election. Measures that would boost economic growth without raising inflation, such as a business investment tax cut and tax changes to support workers, are being prioritised to announce tomorrow. Others are expected to be unveiled in the Budget next spring, ahead of an autumn general election. Yesterday, in an unusual move, the Prime Minister delivered a speech on the economy just two days before the Autumn Statement will be unveiled by Jeremy Hunt, the Chancellor. He confirmed that tax cuts were coming, while insisting it would not be possible to “do everything all at once”. Mr Sunak said: “Now that inflation is halved and our growth is stronger, meaning revenues are higher, we can begin the next phase and turn our attention to cutting tax. 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. We can’t do everything all at once. But over time, we can and we will cut taxes.” He stressed that he was focused on “cutting tax and rewarding hard work”. As well as tax cuts, the Autumn Statement is expected to include welfare reforms to incentivise work, with harsher penalties for those on benefits who do not look for a job and tighter requirements for being signed off sick. Hundreds of thousands of people with mental health or mobility issues will be told to look for opportunities to work from home or face having their benefits reduced, The Times reported. “We believe in the inherent dignity of a good job, and we believe that work, not welfare, is the best route out of poverty,” Mr Sunak said in his speech. The Daily Telegraph has been told that the pensions triple lock will be untouched, with state pensions rising in line with average earnings, in a boost to 12 million older Britons. The Prime Minister sees his approach – first cutting inflation, then cutting tax – as following that of Margaret Thatcher, as he seeks to cast himself as her ideological heir. He had faced anger from MPS on the Right of his party last week following the sacking of Suella Braverman as home secretary and with the Tories still languishing behind Labour in the polls. Mr Sunak also used his speech yesterday to launch a fresh line of attack on Labour, warning that Sir Keir Starmer’s borrowing plans would provoke a fallout similar to that caused by Liz Truss’s mini-budget last autumn. The Prime Minister singled out Labour’s plans to eventually invest up to £28billion a year in green projects, saying it “makes the same economic mistake as last year’s mini-budget”. The speech marked a substantial change in Mr Sunak’s economic approach, with the focus now on growth rather than reducing inflation, after achieving his promise to halve the rate at which prices are rising. It also hinted at the economic dividing lines that will be drawn in the election campaign to come, with No10 insiders arguing the differences between the two main political parties are much starker than appreciated. Mr Hunt, who appeared at a CBI event in London yesterday, also struck an upbeat note on the state of the economy. He said: “I feel a lot more positive about the UK economy than I did a year ago when I came in. The biggest reason is because we have managed to halve inflation – 11.1 per cent inflation, which it was this time last year, is terrifyingly high. We’ve had to do some very difficult things to get it back under control but I hope now people can see we are making progress on that, I will be focusing on growth.” The Treasury has more money to play with in the Autumn Statement than was expected, with persistent inflation leading to higher tax revenues than forecast. The so-called “fiscal headroom” had been £6.5billion in spring, but forecasters now believe it is £25billion. But Mr Sunak’s embrace of tax cuts may come too late as he faces major political challenges. In recent weeks the Prime Minister’s rebrand as the “change” candidate at the Tory conference, watering down of net zero plans and King’s Speech legislative plans have not altered the polls. Opinion polls have the Conservatives 22 percentage points behind Labour on average, the same gap as a year ago, when Mr Sunak was a few weeks into his premiership. Mr Sunak, Mr Hunt and their advisers have spent weeks debating which tax cuts should be unveiled tomorrow and which are better timed for next spring, when the election is closer. The Prime Minister yesterday stressed that he wanted tax cuts that would boost economic growth, with the focus on improving the “supply” side rather than demand. He also said tax cuts must not fuel inflation. As such, business taxes are set to be a major focus, with “full expensing”, which allows companies to claim back 25p for every £1 invested, expected to be continued beyond 2026. Mr Sunak’s decision to group “cutting tax and rewarding hard work” together in his speech has led to speculation that a National Insurance reduction of some form could also be imminent. The Prime Minister is interested in raising the 40p income tax threshold, but some government figures predicted that would not be unveiled tomorrow. Some Tory MPS want him to revive the plans, but it was unclear whether any income tax cut had made it into the final Autumn Statement package. Last night, the Resolution Foundation, a think tank, said that a cut in the basic income tax rate was the “most likely” personal tax cut to be unveiled. Stamp duty cuts have been deemed as inflationary, so are not expected. A decision on inheritance tax cuts is also expected to be pushed back to spring. RISHI SUNAK has vowed to cut tax and reward hard work in a speech on the economy ahead of the Autumn Statement. The Prime Minister said it was time to turn the Government’s “attention” to cutting tax now that it had succeeded in halving inflation. He cautioned that he would do so in a “serious, responsible” way and that “we can’t do everything all at once”, while emphasising the need for tax cuts to help boost economic growth and the “supply side” of the economy rather than just drive up demand. The remarks have been interpreted by some inside the Government as an indication that cuts to income tax and National Insurance are more likely tomorrow than reductions in inheritance tax and stamp duty. Mr Sunak also warned that Labour’s borrowing plans would only repeat the mistakes of Liz Truss’s mini-budget and fuel “higher inflation, financial insecurity and more debt for our children and grandchildren”. The speech in London yesterday morning was a way for Mr Sunak to indicate that a major pivot in his premiership’s economic approach was coming this week. Downing Street believes the Autumn Statement will mark the end of “phase one”, which was about stabilising the economy and bringing down inflation, and the start of “phase two”, focused on boosting growth, in part by tax cuts. Mr Sunak named five economic priorities: reducing debt; cutting tax and rewarding hard work; building domestic, sustainable energy; backing British business and delivering world-class education. The second is the most eye-catching, amid growing speculation about which taxes will be cut in tomorrow’s Autumn Statement. Mr Sunak said: “My argument has never been that we shouldn’t cut taxes. It’s been that we could only cut taxes once we’ve controlled inflation and debt. First, cut inflation. Then, cut taxes. And that’s why I made the promise to halve inflation. And the official statistics show that promise has now been met. “So, now that inflation is halved and our growth is stronger, meaning revenues are higher we can begin the next phase, and turn our attention to cutting tax. 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.” No10 and the Treasury continue to argue that any tax cuts must not be inflationary, given prices are still rising quickly. Therefore, The Daily Telegraph understands that cuts considered to inheritance tax and stamp duty are more likely to be announced in next spring’s Budget. Plans for an inheritance tax cut have faced vocal criticism from some Tory moderates in recent days, while stamp duty is seen by Government figures as likely to fuel inflation further. In the speech, the Prime Minister also unveiled a new attack on Labour, which also served as a rare public rebuke of his predecessor. Ms Truss’s so-called “mini-budget” last Autumn involved sizable tax cuts funded by borrowing, prompting market turmoil that hastened her departure as prime minister. Mr Sunak yesterday argued that the Labour Party’s promise to borrow £28billion a year to invest would trigger a repeat of the minibudget fallout. Labour has said it no longer plans to borrow such an amount in its first year in power. Mr Sunak said: “The truth is Keir Starmer and Rachel Reeves have tried to block or opportunistically oppose almost every major decision we took to get our debt falling. And if they get the chance, they’ll make the problem even worse, continuing the big government, big spending approach of the pandemic and promising to borrow a further £28 billion a year. This makes the same economic mistake as last year’s minibudget. Blowing tens of billions of pounds on unfunded spending is just as dangerous as blowing tens of billions of pounds on unfunded tax cuts. “It is taking the easy way out. And the result is the same: Higher inflation, financial insecurity, and more debt for our children and grandchildren.” Responding to the speech, Pat Mcfadden, Labour’s national campaign coordinator, criticised Mr Sunak’s five economic priorities. He 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.”