Ministers push for tax cuts this year amid hope on inflation

Ministers push for tax cuts this year amid glimmers of hope on inflation and economy – with warnings reducing burden on Brits is the only ‘narrow path’ to a Tory election victory

  • Ministers increasingly hopeful that tax cuts will be back on the agenda this year
  • Warnings reducing burden on Brits is the only ‘narrow path’ to Tory election win
  • Inflation has been easing slightly while there are signs of resilience in economy
  • Chancellor Jeremy Hunt has insisted inflation must be brought under control 

Ministers are pushing for tax cuts this year amid fledgling signs of inflation easing and economic resilience.

Hopes are growing that Chancellor Jeremy Hunt can ease the eye-watering burden on Brits by the Autumn, with fears it could be the only ‘narrow path’ to the Tories winning the next election.

The Treasury is understood to have all-but ruled out tax cuts at the Budget in March, with Mr Hunt adamant that inflation must be tackled first.

However, figures today showed the headline CPI finally nudging down from 40-year highs, with the rate 10.5 per cent in the year to December.

GDP data has also been holding up marginally better than analysts had expected, potentially avoiding a technical recession in the last quarter of 2022. 

Tories believe the government should have a bit more room for manoeuvre after energy costs eased, reducing the bill for the household bill subsidies.  

Hopes are growing that Chancellor Jeremy Hunt can announced a reduction in the eye-watering tax burden on Brits by the Autumn

Inflation dropped slightly in December after spiralling to a 40-year high in October 

GDP data has also been holding up marginally better than analysts had expected, potentially avoiding a technical recession in the last quarter of 2022

Ministers hailed signs inflation is finally on the way down today after the headline figure dipped.  

The annual CPI rate was 10.5 per cent in December, down from 10.7 per cent the previous month, with tumbling fuel costs helping ease the pain for Brits.

It is the second consecutive fall in the index, with experts suggesting the peak has passed after the 40 year high of 11.1 per cent in October. It could ease the pressure on the Bank of England to keep increasing interest rates – although another rise in a fortnight looks inevitable. 

However, Chancellor Jeremy Hunt warned there can be no letting up on efforts to tackle the curse of soaring prices. Ministers also vowed to hold firm against a wave of public sector strikes, saying giving in to demands for double-digit pay hikes would risk undoing the progress that has been made. 

One senior minister told MailOnline that Rishi Sunak and Mr Hunt would take the decision, but a likely election in the second half of next year should focus minds. Tax cuts could help boost Rishi Sunak’s position and morale in the crunch final year of the parliament.

The minister said there were ‘some grounds for hope with the economic data looking slightly better’.

‘Bills are starting to ease, inflation might be coming down,’ they said.

‘If we can make some savings on things like the energy bills scheme, if the economy is stronger because we’ve stabilised the government, we might be able to return to the issue of tax cuts soon.’

They added: ‘It’s a narrow path. We need a better economy, persuade people to trust us with the NHS. We might need to get lucky with Ukraine, and hope Starmer makes mistakes.

‘But it is all about momentum. If we go into 2024 putting some money back into people’s pockets then it will be all to play for.’

A Treasury source insisted that tackling inflation was the ‘priority’ for Mr Hunt.

‘We want low taxes and sound money. But sound money has to come first because inflation eats away at the pound in people’s pockets even more insidiously than taxes,’ they said.

However, they acknowledged that the Bank of England is anticipating the PM’s goal of halving inflation could be reached by the final quarter of the year.

The annual CPI rate was 10.5 per cent in December, down from 10.7 per cent the previous month, with tumbling fuel costs helping ease the pain for Brits.

A fall in motor fuel prices was one of the main factors in bringing down headline CPI in December

That benefit was partly offset by the continuing surge in food prices.  

It is the second consecutive fall in the index, with experts suggesting the peak has passed after the 40 year high of 11.1 per cent in October. It could ease the pressure on the Bank of England to keep increasing interest rates – although another rise in a fortnight looks inevitable. 

However, Mr Hunt warned there can be no letting up on efforts to tackle the curse of soaring prices. Ministers also vowed to hold firm against a wave of public sector strikes, saying giving in to demands for double-digit pay hikes would risk undoing the progress that has been made. 

Speaking after the figures were announced this morning, Mr Hunt said: ‘There is no room for any deviation from our central objective of the year, which is to halve inflation, so that we deal with, for example, the anger of public sector workers who are seeing their pay eroded, we deal with the pressure that pensioners are seeing when they are doing their weekly shop, the pressure on businesses worried sometimes about their viability.

‘This has to be our central mission and that’s why the Prime Minister has nailed his colours to the mast and said we are going to halve inflation over the next year.’

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