Prime Minister Rishi Sunak has pledged to cut taxes once inflation is brought under control, addressing concerns from members of the Conservative Party regarding increased tax levels since the COVID-19 pandemic. Speaking at the party’s annual conference in Manchester, Sunak acknowledged the desire for tax cuts, stating, “I want them too and we will deliver them. But the best tax cut we can give people right now is to halve inflation and ease the cost of living.”
Throughout the year, Sunak and his finance minister Jeremy Hunt have emphasized the priority of halving inflation, which reached a 41-year high of 11.1% in October 2022. They argue that tax cuts could potentially hinder this goal. However, many party members are becoming impatient for tax reductions, particularly with a national election looming next year, as the Conservatives are currently trailing behind the opposition Labour Party in opinion polls.
The Institute for Fiscal Studies, a non-partisan think tank, recently projected that tax revenue is expected to account for 37% of annual economic output at the time of the next election, up from 33% in December 2019. If this projection holds true, it would mark the highest tax rate in Britain since at least the 1950s, although still below most similar European economies.
The government aims to address these concerns by reducing the number of civil servants, which rose during the pandemic, after the country’s inflation rate stabilized. In August, inflation stood at 6.7%, and the Bank of England predicts it will decrease to 4.9% in the final quarter of next year, eventually reaching the target of 2% in the second half of 2025.
Finance Minister Jeremy Hunt is set to present updated economic forecasts and budget plans on November 22, providing further details on the government’s strategy to tackle inflation and address tax concerns.
More detail via Yahoo! Finance here… ( Image via Yahoo! Finance )