Jacob Rees-Mogg has said cutting taxes immediately may reduce inflation in comments that will put him in direct dispute with Boris Johnson and Rishi Sunak.
The Brexit minister today said getting inflation under control “doesn’t necessarily mean tax increases – indeed it could mean tax cuts”.
Johnson and Sunak have both said the UK cannot cut taxes until inflation – which is at a 40-year high of 9.1 per cent – is under control.
Cutting taxes would likely lead to increases in domestic consumption, which would put further pressure on spiralling prices.
The Times reported today that the pair are looking toward next year to provide tax relief, after increasing the UK’s tax burden to its highest level in seven decades post-Covid.
Rees-Mogg told ConservativeHome that high interest rates, lower taxes and reduced government spending would bring down inflation.
“Because those of us who are admirers of Reaganomics will remember that his means of keeping expenditure under control was to cut taxes so the government simply didn’t have the money to spend more,” he said.
“And that brought public expenditure under control although the deficit obviously rose very sharply, at least initially, although the success of the Laffer curve and the economic growth it provided meant the budget deficit in the US got under control.”
Johnson and Sunak are due to make a joint speech next month about the UK’s economic direction.
However, there will reportedly be no major policy announcements despite recent promises by the Prime Minister to Tory MPs that he will slash taxes.
“This speech will not be about tax cuts. They’re a matter for fiscal events,” a government source told The Times.
“It’s about setting out a medium to long-term plan for dealing with the cost-of-living crisis.”