British Chancellor Jeremy Hunt said on Tuesday he would love to lower taxes in the run-up to a national election expected next year, but added that any tax cut at the moment would be inflationary.
Hunt said that reducing taxes at a fiscal event in November would not be possible even if the government met a target to halve inflation this year.
“Obviously, in the run-up to an election, I would love to do a tax cut that ordinary people felt,” Hunt told a gathering at the annual conference of the governing Conservative Party in Manchester.
“At the moment, we’re not in a position to have that discussion … because any tax cut would be inflationary.”
Britain had the highest annual rate of consumer price inflation among major advanced economies at 6.7% in August.
“It would be absolutely crazy to give people money with a tax cut in one hand and then for them to see all that money taken away by inflation going back up,” Hunt said.
Hunt has resisted pressure from Conservative lawmakers to cut taxes this year, although he said that his first priority when it was possible would be business tax cuts, as advocated by former prime minister Liz Truss.
Asked if he could cut taxes at the Nov. 22 Autumn Statement if a target to halve inflation was met, Hunt said that talk of tax cuts was still “slightly academic” because of a big rise in debt interest payments in the last six months.
Britain’s government accrued 102 billion pounds of interest payable on debt during the year to August 2023, official statistics show – much of it generated by inflation-linked government bonds.
“I think it’s incredibly unlikely we’d have any headroom to do anything like that,” Hunt said.
“So that’s why I’m being very honest with people that I don’t think this is the time that we’re going to be able to have those discussions.”