The chancellor has warned “difficult decisions” need to be made to “reform the welfare state” as he mulls introducing controversial tax cuts in next week’s autumn statement.
Jeremy Hunt said there is “no easy way to reduce the tax burden” following reports he’s looking to slash inheritance tax and levies on businesses.
Tax levels are at a 70-year-high, according to the Institute for Fiscal Studies think tank, and Rishi Sunak is under growing pressure from the Tory right to get them down before the next general election.
Mr Hunt is said to be considering a big squeeze on benefits in order to find savings in next Wednesday’s statement, effectively cutting working age welfare payments for millions of people.
Speaking in Milton Keynes on Saturday, Mr Hunt said: “There’s no easy way to reduce the tax burden.
“What we need to do is take difficult decisions to reform the welfare state.”
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Typically, ministers uprate working age benefits based on the September figure for inflation – so a 6.7% hike.
But the chancellor has not ruled out using October’s figure instead, which would mean a 4.6% rise.
Economists say this would equate to a £3bn spending cut, largely impacting households receiving means-tested or disability benefits.
The move would be bound to draw criticism for supporting the wealthy while others struggle with the cost of living.
Conservative former chancellor Lord Clarke said some voters would find it “appalling”.
Slashing inheritance tax – which is charged at 40% on estates of more than £325,000, with an extra £175,000 towards a main residence passed to direct descendants – would only help a relatively small percentage of the population.
Just 4% of deaths in 2020/21 resulted in any being paid.
The options for cutting the tax include reducing it by 50%, 30% or 20%, according to The Times.
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‘We will take path to tax cuts’
Mr Hunt has appeared to tease the cuts, claiming the UK has reached “a turning point for the economy”.
He told The Telegraph this week: “The big message on tax cuts is there is a path to reducing the tax burden and a Conservative government will take that path.”
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Reports suggest the Tories could pledge to abolish inheritance tax entirely ahead of next year’s election.
It could cost £7bn a year in the short term, but the Institute for Fiscal Studies forecast the amount that the tax raises could rise to more than £15bn by 2033.