Rishi Sunak warns of potential reductions in funds for households receiving Universal Credit as a means to finance tax reductions.
Rishi Sunak has issued a warning of potential reductions in Universal Credit benefits to fund tax cuts, signaling a strategy of making “difficult decisions to control welfare” for the sake of pre-election tax cut giveaways. In a boastful tone, he highlighted the Autumn Statement’s claim of delivering “the biggest set of tax cuts in one event since the 1980s,” despite an increased number of individuals being pushed into higher tax brackets.
Speaking to The Sunday Telegraph, Sunak emphasized the commitment to responsible tax cuts while acknowledging the necessity of challenging choices regarding public spending and welfare control. He stated, “I’m very clear: I want to control public spending, I want to control welfare, which we’re doing.” Sunak asserted that by exhibiting discipline in borrowing and managing debt, the government aims to create a conducive environment for tax cuts.
The Prime Minister, echoing Sunak’s sentiments, emphasized the priority of continuously reducing taxes following the recent introduction of a 2p cut in national insurance. He underscored the interconnectedness of tax reduction and constraints on public sector growth, claiming that without restraints on government spending, tax cuts would be unfeasible.
Sunak’s commitment to offering tax cuts while tightening public spending seems strategic, potentially creating a distinction from Labour’s stance in anticipation of a general election. Despite Keir Starmer’s pledge in September not to raise taxes and Shadow Chancellor Rachel Reeves assuring no tax increases for working people under a Labour government, Sunak warned that taxes would rise if Labour assumes office.
The recent reduction in the main rate of national insurance by two percentage points, from 12% to 10%, drew mixed reactions. Chancellor Jeremy Hunt celebrated the nearly £1,000 annual benefit for families with two earners. However, Labour criticized the move, labeling it a “raw deal” due to frozen tax thresholds, a policy initiated by Sunak during the pandemic. These stagnant thresholds could lead to automatic tax increases as wages rise with inflation, while tax bands remain static.
Despite declining to specify which taxes he envisions reducing or abolishing, the Prime Minister emphasized his belief in a society where hard work is duly rewarded. Pressure from Tory MPs post the Autumn Statement to further cut income tax or inheritance tax was evident. Hunt, in a BBC interview, criticized inheritance tax as “pernicious” but remained uncertain about the feasibility of tax reduction in 2024.
The upcoming Budget on March 6 and Sunak’s hint at a potential election in the second half of the year indicate a dynamic political landscape with fiscal decisions at its core.
