Chancellor Jeremy Hunt is seeking to shift attention on Monday from an escalating Conservative conference row over high levels of tax by announcing policies intended to put the Tories on the side of “workers versus shirkers”.
Hunt ruled out tax cuts in the short term on Monday morning, warning that to reduce them now would be “inflationary” and that they could only be afforded if the government took “difficult decisions”.
So far the party conference has been dominated by a clamour from senior Tories, including some ministers, for UK prime minister Rishi Sunak and the chancellor to cut taxes before the election.
In a bid to change the topic, Hunt is planning to guarantee in his speech later in the day that the national living wage will rise by at least £1,000 next year, meeting a 2019 manifesto commitment to increase pay for the lowest paid to two-thirds of median earnings.
He will also promise to introduce new sanctions on benefit claimants who refuse to seek work, which Tory insiders said could be aimed at up to 100,000 people.
In a message to Liz Truss, former prime minister, and other Conservative MPs demanding immediate tax cuts, Hunt told the BBC on Monday morning: “If we want faster growth and to get out of ever-ratcheting higher taxes that’s possible but there are no short-cuts.”
The chancellor also hinted that cuts to the HS2 high speed rail project were coming. “As chancellor, I do have to answer the question about why it costs 10 times more to build high speed rail in this country than across the channel in France,” he told the BBC.
Hunt’s promise to follow the recommendations of the Low Pay Commission — which is expected to propose a rise in the hourly rate to at least £11 — is cast as an attempt to help struggling families.
The pledge to toughen the sanctions regime is less well developed but will form part of Hunt’s efforts to get more people off benefits and into work at his Autumn Statement.
“Around 100,000 people are leaving the labour force every year for a life on benefits,” he said, adding that it was a “fundamental matter of fairness” to ensure that people who were not looking for work received lower benefits. One Conservative official characterised the policy as “workers versus shirkers”.
Hunt’s address to party members in Manchester on Monday afternoon will come shortly after Truss makes the case for radical tax cuts at a “British growth rally” on the conference fringes.
The former prime minister, whose tax-cutting policies disastrously fell apart in the September 2022 “mini” Budget, will demand a cut in corporation tax from 25 per cent to 19 per cent.
“We can’t stand idly while companies like AstraZeneca move operations abroad because of our huge tax burden or small businesses shut up shop because they are drowning in red tape,” she will say.
Sunak on Sunday declined repeatedly to guarantee tax cuts before an election, expected next year, arguing that cutting inflation was the “biggest tax cut” that he could make.
Hunt has warned that tax cuts in his Autumn Statement are “virtually impossible”, arguing they would complicate the fight against inflation and were unaffordable at the moment.
Hunt’s spring Budget is seen as the likely moment for a pre-election giveaway, but many Tory activists and MPs are growing impatient.
Michael Gove, levelling up secretary, ratcheted up pressure on Sunak and Hunt to go further, telling Sky News on Sunday: “I would like to see the tax burden reduced before the next election.”
Gove’s intervention came after the Institute for Fiscal Studies think-tank recently warned that taxes were on course to increase by £3,500 per household since 2019, a record rise for any parliament.
Truss is one of 33 Tory MPs to sign a pledge to their constituents vowing not to support any further tax rises, in a sign of growing restlessness in the party on the issue.
Meanwhile, another group of rightwing MPs is set to heap pressure on Sunak to raise the threshold at which VAT is levied from £85,000 — where it has been frozen since 2017 — to £250,000.
The New Conservatives, led by rising stars of the 2019 intake of Tory MPs Danny Kruger and Miriam Cates, will demand the tax cut for small businesses at a rally in Manchester on Monday afternoon.
This article was written by Madeleine Speed from The Financial Times and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.