A major package of tax cuts this autumn was growing less likely as Chancellor Jeremy Hunt signalled the pledge to halve inflation was proving harder than expected.
Hunt warned he must “double down” on high prices and cannot take actions that would “pump billions of additional demand” into the economy.
Failing to cut taxes will alarm Tory MPs who have been pressing for a pre-election giveaway in the Autumn Statement to help drive economic growth and curry favour with voters.
Rishi Sunak set halving inflation to about five per cent by the end of the year as one of his five priorities for the nation but it has stubbornly remained at 8.7 per cent.
In an interview with the Financial Times, Hunt said achieving that promise was “going to be more challenging than we thought”.
“We will not countenance tax cuts if they make the battle against inflation harder,” he said.
“If we were to pump billions of pounds of additional demand into the economy when inflation is already too high, that would mean fiscal policy working against monetary policy.”
With the Conservatives trailing Labour in the polls, the Prime Minister wants to cut taxes before the next election.
But time is running out with one due before the end of January 2025.
On Monday, Hunt will announce measures he hopes will grow the economy by making UK stock markets more appealing to firms seeking to float their businesses.
In a speech at London’s Mansion House, he will detail plans to simplify the rules for buying and selling shares and deliver higher returns for investors.
He will also announce a vision for a new kind of stock exchange allowing private companies to access markets without floating.
Press Association – Sam Blewett