The Chancellor, Jeremy Hunt, emphasized the necessity for tough decisions in reshaping the welfare system as he seeks to reduce benefits by significant amounts while also contemplating reductions in inheritance tax.Thank you for reading this post, don't forget to subscribe!
Hunt hinted at the possibility of lowering taxes for businesses as he strongly indicated in the autumn statement on Wednesday that tax cuts would be utilized to stimulate economic expansion.
Nevertheless, the move to cut inheritance tax while concurrently reducing welfare payments for working-age individuals is anticipated to draw criticism for favoring affluent individuals while others grapple with increased living costs.
During a visit to Milton Keynes on Saturday, Hunt informed broadcasters, “You will have to await Wednesday to learn of the decisions I have made, but I want to make one thing clear: reducing the tax burden is not straightforward.”
Ministers typically utilize the September figure to adjust for inflation when elevating benefits for working-age individuals, which would result in a 6.7% increase.
However, Hunt has not ruled out using the notably lower October figure of 4.6%, a move that economists suggest would lead to a reduction in expenditure of approximately £3bn.
According to the Institute for Fiscal Studies, these savings would disproportionately impact households with working-age individuals receiving means-tested or disability benefits.
The charity Disability Rights UK criticized the persistent focus on benefits, particularly amid a rising trend of disability hate crime, deeming it unconstructive.
The Tory right is likely to welcome the potential cut in inheritance tax, possibly by 50%, thereby heightening pressure on Rishi Sunak from that faction of the party. Nevertheless, it would directly benefit only a small portion of the population.
Only 4% of deaths in 2020/21 resulted in the payment of inheritance tax, with exemptions enabling numerous couples to pass on up to £1 million without incurring tax.
Hunt refrained from commenting on taxes on Saturday but emphasized that he would not undertake any action that could jeopardize the fight against inflation, following the successful achievement of the Prime Minister’s objective to halve them this year.
In a departure from his typically cautious language, Hunt strongly suggested that he would unveil the tax cuts this week, stating to the Telegraph that they have “initiated substantial changes.”
“This is an autumn statement for progress, unencumbered by considerations of decisions made by the Prime Minister and myself. This represents a turning point for the economy,” he articulated in the interview.
When asked if now was the time for economic advancement, Hunt replied, “Yes, definitely. At this moment. As a nation, we must rise to this occasion and I believe we have a significant opportunity ahead.”
“The key message about tax cuts is that there is a pathway to reduce the tax burden, and a Conservative government will pursue that route,” he conveyed.
Potential options for reducing inheritance tax, which is enforced at a rate of 40% on estates exceeding £325,000, with an additional £175,000 for a primary residence passed on to direct descendants, include reductions of 50%, 30%, or 20%. Implementing this process would involve numerous stages.
Lord Clarke expressed that this is not the tax cut he would opt for (Danny Lawson/PA)
The Conservatives are reportedly contemplating featuring the complete abolition of inheritance tax in their election manifesto next year, a move that could incur a cost of £7 billion annually in the near term.
Nonetheless, the Institute for Fiscal Studies estimates that the tax cuts could result in an excess of £15 billion by 2033.
Former Conservative Chancellor Lord Clarke mentioned that the move would be well-received by Tory MPs given the party’s significant lag behind Labour by over 20 points in the polls, but it would be deemed “appalling” by others.
Hunt emphasized that there is “no straightforward method” to lessen the tax burden, highlighting the necessity for “more efficient public services.”
During his visit to the center for police, ambulance, and fire services on Saturday, Hunt announced plans to enhance productivity by leveraging technology, including artificial intelligence, to reduce administrative burdens.
Hunt also indicated his impending address at the Confederation of British Industry’s annual conference on Monday, a potential significant boost for the beleaguered organization.
In April, the Chancellor had dismissed engagement with the CBI, citing numerous allegations of sexual misconduct and assault that had led to several of its members departing the organization. However, following the change in leadership, Hunt hinted at the Government’s intention to normalize relations, ahead of delivering an “autumn statement for growth.”
“Therefore, in our pursuit of economic growth, we will heed the perspectives put forth by all business-representing bodies, whether it is the CBI, Make UK, or the FSB representing small enterprises,” he asserted.