Rishi Sunak has told a group of Conservative MPs that raising taxes this year will give him scope to cut them in the lead up to the 2024 election.
The chancellor told the 1922 Committee of Tory backbenchers yesterday that he will have to make difficult choices this year to trim the UK’s bulging Budget deficit.
The call came in the lead up to his 3 March Budget, which is rumoured to include an increase in corporation tax.
One MP at the meeting told the Telegraph: “He basically said we can’t be Labour lite.”
Another said: “People asked, ‘why can’t you cut taxes now?’
“[Sunak] said he wants to be tax cutting towards the end of the parliament, that there will probably be some rises in the middle, and that we’re going to be frank with people about the tough choices ahead.”
The UK’s annual deficit will likely surpass £400bn this financial year, which would mark the highest level of relative government spending since World War II.
Sunak’s spending on the coronavirus alone has topped £300bn.
However, any move to consolidate the deficit by cutting taxes will likely be met with anger by many Conservative members and the party’s fiscally hawkish MPs.
Speaking to City A.M. two weeks ago, Sunak said: “Over time I think it’s important public finances are sustainable and lots of people have slightly different versions of what sustainable looks like, but I think they agree it should be sustainable over time and that’s something I have to have regard to as the person responsible for the nation’s finances.”
Global financial bodies, such as the International Monetary Fund (IMF), have called for governments to not quickly cut their deficits during the immediate post-Covid recovery.
Many economists instead are urging governments to space out budget cuts over many years and to instead rely on interest rates staying at their current historic lows.
The chancellor has slapped down those urging him to take greater advantage of low-interest rates, saying we should show “humility” and accept it is difficult “to know what will happen” in the future, with the UK exposed to even a minor uptick.