Jeremy Hunt, the UK’s chancellor, has acknowledged that the government is unlikely to implement tax cuts before the upcoming election.
He emphasized that the economy would not receive a significant boost by injecting billions due to demand, which would worsen the battle against inflation.
Despite Prime Minister Rishi Sunak's promise to reduce the UK's inflation to around 5 percent by year-end, it has remained at 8.7 percent. Hunt told media sources in an interview that achieving this target would be more challenging than anticipated.
He explained that the government won't support tax cuts if they worsen the fight against inflation. Adding that pushing billions of pounds more into the British economy while inflation is already too high would mean UK spending plans would contradict efforts to control inflation.
The chancellor’s statements have unsettled some Conservative MPs, who have advocated for tax reduction before the UK’s general elections in 2024.
The chancellor made these remarks ahead of his scheduled annual speech on Monday to the City of London, where he plans to announce measures to stimulate economic growth. These measures include making UK stock markets more attractive to businesses seeking to go public, simplifying share trading rules, and sharing his dream for a new type of stock exchange to facilitate market access for private companies.
Hunt stated that these prudent modifications are drawn from the gains of Brexit to simplify the rules - making it convenient for companies to conduct research, obtain funds, and launch their businesses.
Hunt also expressed the government's stance on public sector pay demands, suggesting resistance to inflationary increases while urging companies to keep prices low to help ease the cost of living crisis on their customers.
Several UK Cabinet ministers, like the education secretary, health secretary, defense secretary, justice secretary, and home secretary, have lobbied Sunak to accept a recommended 6% pay rise for public sector workers, according to media sources.
Edward Leigh, a Tory member of Parliament, expressed the need to provide hope to people feeling down. He emphasized the importance of taking action before the next general election. According to Leigh, offering tax-cutting relief for corporations, individuals, and fuel is crucial.
Another member of Parliament warned Hunt that if people did not experience an increase in their disposable income, the Conservative Party would face a significant and decisive change in government, marking the end of an era.
Conservative backbench MPs had earlier this year pressured the chancellor to introduce tax reduction sooner rather than later. The party faces a polling deficit compared to the Labour Party, with recent predictions indicating that Labour could secure a 140-seat majority in the next election, holding a 12% lead over the Conservatives.