A senior Treasury minister has defended the government’s tax plans after a report said British households were facing the biggest rise on record.
Andrew Griffith said on Friday the government would stick to its spending plans even as pressure grew from Conservative backbenchers to cut taxes in the next budget.
His comments came after the Institute for Fiscal Studies published a report saying UK households faced an average tax rise of £3,500 a year by the next election, pushing up tax revenue from 33% of national income four years ago to 37% by next year.
Ben Zaranko, a senior research economist at IFS, said: “This is not, for the most part, a direct consequence of the pandemic. Rather, it reflects decisions to increase government spending, in part driven by demographic change, pressures on the health service and some unwinding of austerity.
“It is likely that this parliament will mark a decisive and permanent shift to a higher-tax economy.”
Griffith told Sky News: “I think that the economy runs best when it has stability, which is our focus right now, bringing down inflation, which is a tax rise by another name.”
He added: “Right now, because of the constraints that the economy is facing, our priority is inflation. I’m pleased that the plan for reducing inflation is on track, but there’s no margin to change that at the moment. We’ve got to stick with it and deliver that.”
Labour has refused to commit to tax cuts if it wins the next election. Darren Jones, the shadow Treasury chief secretary, told Sky News: “The IFS data shows that the population is generally getting older, and when you get a bit older, you need more help from the health and social care system.”
Jeremy Hunt, the chancellor, has come under increasing pressure in recent months from Conservative colleagues to cut taxes. Priti Patel, the former home secretary, told GB News on Friday: “The tax burden is now [at a] 70-year-high. That is unsustainable. And the people that pay the taxes are hard-pressed Brits around the country.”
Hunt has argued that cutting tax would further fuel inflation. However, Rishi Sunak is reported to be considering a pledge to abolish inheritance tax altogether, a proposal that the IFS said earlier this week would cost the government £7bn.
Griffith said on Friday the government wanted to cut taxes once inflation had fallen further. “This is still a government that believes in taking people out of tax and reducing the tax burden.”
Tory tax-cutters have been given ammunition by falling inflation levels; while prices rose by 6.7% in August this was lower than economists had expected.
Ministers were given a boost on Friday by official figures showing economic growth has been higher than previously thought. According to quarterly statistics from the Office for National Statistics, the economy grew 0.3% in the first quarter of this year, rather than 0.1% as previously thought.
Hunt said: “The best way to continue this growth is to stick to our plan to halve inflation this year, with the IMF forecasting that we will grow more than Germany, France, and Italy in the longer term.”
