Who will Jeremy Hunt give money to in the Autumn Statement on Wednesday? Everyone in the Conservative Party wants to cut taxes. They look at the burgeoning tax burden with horror. The question is which ones and how.
If the Chancellor decides, as was briefed to the papers last week, to increase benefits in line with October’s lower inflation figures instead of September’s, as well as cut inheritance tax, when £1m can already be inherited tax-free, then he would effectively be redistributing money from the poor to the wealthy. This worries MPs from the party’s centre. Damian Green, who leads the Conservatives’ One Nation caucus, has said tax cuts should be directed at those “who are struggling most”. Now, briefings suggest Hunt is looking at cutting personal taxes such as National Insurance.
Whichever tax gets the axe, the political context for that decision has been inverted since the last election. Back then, the prospect of tax increases under Jeremy Corbyn dominated. In reality, the Conservative government has overseen the tax burden reaching its highest level since the 1940s. It has been rising since the 1990s but spiked sharply following Boris Johnson’s election. The public has taken note, as you’d expect. Labour (with 30 per cent) leads the Conservatives (with 20 per cent) on which party would handle taxation best. A recent Survation poll found a majority (52 per cent) associated the Conservatives with high taxation, ten points higher than for Labour.
The cost-of-living crisis makes this choice more painful for the Chancellor. People want to pay less tax, naturally. But Hunt also risks stoking anger within his party over cutting benefits. Labour knows this. Rachel Reeves said yesterday she did not support a cut to inheritance tax because the money should be spent helping those struggling with the cost of living.
The challenge for Labour is maintaining its new reputation for lower taxes, a powerful asset for the election, while letting the Tories cannibalise themselves as they try to square the circle of cutting taxes and paying for them without more borrowing.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.
[See also: The quiet ruthlessness of Claire Coutinho]