Hunt warns of ‘difficult decisions’ on benefits as he mulls inheritance tax cut

 (PA Wire)
(PA Wire)

Chancellor Jeremy Hunt said “difficult decisions to reform the welfare state” are needed as he considers squeezing benefits by billions while slashing inheritance tax.

Mr Hunt indicated he could reduce levies on businesses as he gave his strongest hint yet that he will use Wednesday’s autumn statement to cut taxes in a bid to boost economic growth.

But slashing inheritance tax while effectively cutting working-age welfare payments for millions of people would be bound to draw criticism for supporting the wealthy while others struggle with the high cost of living.

Speaking to broadcasters on Saturday during a visit to Milton Keynes, the Chancellor said: “You are going to have to wait until Wednesday to hear the decisions I take but one thing I want to be very clear about: there’s no easy way to reduce the tax burden.

“What we need to do is take difficult decisions to reform the welfare state.”

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

But Mr Hunt has not ruled out using October’s far lower figure of 4.6%, which economists say would cut spending by around £3 billion.

The savings would largely impact working-age households receiving disability or means-tested benefits, according to the Institute for Fiscal Studies.

The Disability Rights UK charity said the “ongoing rhetoric” about benefits is “becoming relentless and in an era of rising disability hate crime, unhelpful”.

Slashing inheritance tax – potentially by half – would be popular with the Tory right as Rishi Sunak comes under growing pressure from that wing of his party but would only directly benefit a small proportion of the public.

Only around 4% of deaths in 2020/21 resulted in inheritance tax being paid, with exemptions allowing many couples to pass on up to £1 million tax-free.

Mr Hunt declined to comment on taxes on Saturday but said he will “not do anything to jeopardise” the battle against inflation, after the Prime Minister’s target of halving it this year was hit.

Having in the past only used the most cautious of language, Mr Hunt gave his strongest hint yet that he will unveil tax cuts this week by telling the Telegraph they had “turned the corner in a big way”.

“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 in the interview.

Asked if now was the time to go for economic growth, Mr 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.”

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 £7 billion 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 £15 billion by 2033.

Conservative former chancellor Lord Clarke said the move would be welcomed by MPs on the Tory right as the party lags more than 20 points behind Labour in the polls, but others would find it “appalling”.

Mr Hunt said there is “no easy route to reducing the tax burden”, as he stressed the need to have “more productive public services”.

On Saturday, he visited a hub for police, ambulance and fire services and announced plans to boost productivity by using technology including AI to reduce admin workloads.

Mr Hunt also signalled that he will be speaking at the Confederation of British Industry’s annual conference on Monday, in a major boost for the troubled body.

The Chancellor said in April that there was “no point” engaging with the CBI as dozens of its members were deserting it over sexual misconduct and rape allegations.

But after a change in leadership, Mr Hunt indicated the Government would be re-normalising relations ahead of giving his “autumn statement for growth”.

“And so, if we’re going to grow the economy, we’re going to listen to all bodies that represent businesses, whether it’s the CBI or Make UK or the FSB representing small businesses.”