Jeremy Hunt considers inheritance tax cut while squeezing benefits

Jeremy Hunt has given his strongest hint yet that he will announce tax cuts in his autumn statement, as he considers cutting those on inheritance and businesses while squeezing benefits by billions.

Ahead of Wednesday’s financial announcement, the chancellor said that now is a “turning point for the economy” and that “this is the moment” to go for growth.

But he said there is a need to “reform our welfare system” and the “priority” for the autumn statement is helping firms.

Hunt is also considering slashing inheritance tax, which would be bound to draw criticism for supporting the wealthy while others struggle with the high cost of living.

UK inflation rate. See story ECONOMY Inflation. Infographic PA Graphics. An editable version of this graphic is available if required. Please contact graphics@pamediagroup.com. PA Media

Conservative former chancellor Lord Clarke said the move may please MPs on the Tory right who are clamouring for tax cuts as the party lags more than 20 points behind Labour in the polls, but others would find it “appalling”.

In a sign he will go with tax cuts next week, Hunt told The Telegraph: “Without pre-empting the decisions that the Prime Minister and I make, this is an autumn statement for growth. It’s a turning point for the economy.”

He said the country has “turned the corner in a big way” after Prime Minister Rishi Sunak’s pledge to halve inflation was met this week.

Asked if now was the time to go for economic growth, Hunt said: “Yes, absolutely. This is the moment. We’ve got to go for it as a country and I think we’ve got a big, big opportunity.”

He added: “The big message on tax cuts is there is a path to reducing the tax burden and a Conservative government will take that path.”

Typically ministers use the September figure for inflation when uprating working-age benefits, which would mean a 6.7% hike.

But Hunt has not ruled out using October’s far lower figure of 4.6%.

Asked about the possible move in an interview with the BBC during a visit to a manufacturer, the chancellor said: “We will always be a compassionate Conservative government but part of how we make our economy successful is by making sure companies like this company can find the staff they need.

“Nearly a million vacancies across the economy, so we do need to reform our welfare system.”

Sources said a decision on the figures is yet to be made.

Ministers have already announced a fresh welfare crackdown amid efforts to get people back into work under a toughened sanctions scheme.

Free prescriptions and legal aid will be cut off for benefit claimants who are deemed fit to work and do not seek employment.

There are hopes the final forecasts from the Office for Budget Responsibility will give Hunt more “fiscal headroom” than expected to make tax cuts when he receives them on Friday.

The chancellor said he wants firms to be the focus of any tax cut he may offer, during a visit to the ITM Power manufacturer in Sheffield.

“In terms of tax cuts you’ll have to wait and see but I will say the priority is helping businesses like this to succeed,” he told the BBC.

The options for cutting inheritance tax – which is charged at 40% on estates of more than £325,000, with an extra £175,000 towards a main residence passed to direct descendants – include reducing it by 50%, 30% or 20%, according to The Times.

The Tories are said to then be considering making abolishing it entirely an election manifesto pledge next year, which could cost £7bn a year in the short term.

However, the Institute for Fiscal Studies forecast that the amount that the tax raises could rise to more than £15bn by 2033.

Lord Clarke said it is not the tax cut he would choose. PA Media

Lord Clarke told Times Radio: “Well, it’s not the tax cut I would choose. Indeed, I’m not sure he’s got any room for tax cuts.

“And choosing inheritance tax at the present time might appeal to the Conservative right, but it leaves them open to the most appalling criticisms when inflation and the state of affairs is making poorer people in this country very vulnerable indeed, giving tax relief to those families that are lucky enough to have members of it with capital above the limit through inheritance tax and pay any significant amount of tax on the inheritance.

“And I’m not sure that the economic and financial state of the country justifies it.”

Labour leader Sir Keir Starmer said he would wait to see what is in the autumn statement before commenting on any plan to cut inheritance tax.

“We’ll have to wait to see what the Government says in its autumn statement. What I want to see is a serious plan for growth,” he told broadcasters during a visit to Scotland.

Elsewhere in the Telegraph interview, Mr Hunt said he would stand as an MP at the next election, despite speculation that he could quit.

The Liberal Democrats are eyeing the Surrey seat he will contest.

“I’m aware that it’s the fight of my life, but I’m up for that fight and I’m very confident that I will be back in Parliament after the next election,” he said.