Jeremy Hunt defends his ‘stealth’ tax raid and fails to rule out a huge hike in fuel duty next year

Jeremy Hunt today reiterated his promise to bring down tax rates ‘when we can’ even as he admitted they had risen to their highest level for 70 years.

The Chancellor defended his ‘stealth’ raid on working Britons – through the extension of a freeze on tax thresholds – as a ‘better way’ of hiking levies.

He also refused to rule out a huge rise in fuel duty next year as he insisted he ‘cannot afford’ to offer permanent relief to hard-pressed motorists.

But, while he confirmed the scrapping of the Office for Tax Simplification, Mr Hunt admitted the UK’s tax system was ‘far too complex’ and promised to ‘make progress’ on the issue.

Appearing before the House of Commons’ Treasury Committee this morning, the Chancellor was unclear about when he might reduce families’ tax bills.

Liz Truss swipes back at Jeremy Hunt after he takes aim at ex-PM’s mini-Budget ‘mistakes’ 

Former prime minister Liz Truss today swiped back at Jeremy Hunt after the Chancellor took aim at her mini-Budget ‘mistakes’.

The Chancellor said the ex-premier’s fiscal package last September, which saw meltdown on financial markets, shows ‘you can’t fund tax cuts through increased borrowing’.

‘Yes, there were some mistakes in the mini-Budget which we had to reverse and in particular I think it is clear you can’t fund tax cuts through increased borrowing,’ Mr Hunt told the House of Commons’ Treasury Committee.

‘That is a clear thing that we changed course on.’

But Ms Truss hit back at the Chancellor with criticism of Mr Hunt’s hike to Corporation Tax.

A spokesman for the ex-PM said: ‘Liz was always clear that you can’t deliver economic growth and thus reduce borrowing by hiking taxes.

‘Raising Corporation Tax from 19 per cent to 25 per cent looks like a pretty bad mistake right now when you consider how a firm like Astra Zeneca is locating its new plant in Ireland where Corporation Tax is half the rate now being levied by the British Government.

‘The Treasury looks like it will lose revenue as a result of that decision.’

Advertisement

Following his Budget this month, the Office for Budget Responsibility (OBR) forecast that the UK’s tax burden remained on course to reach a post-Second World War high. 

Mr Hunt pointed to the Government’s huge spending on the Covid crisis and in providing energy bills relief following the war in Ukraine as the two biggest factors behind the onerous burden on taxpayers.

‘As a proportion of GDP I accept that following a once-in-a century global pandemic and a once-in-a-generation energy crisis… yes, I accept the tax burden has gone up for the moment,’ the Chancellor said.

‘But I want to bring it down and that is why the focus in the Budget was unlocking our long-term economic growth rate through addressing labour supply and business investment.’

At his recent Budget, Mr Hunt confirmed he was keeping an extended freeze on income tax thresholds.

The move, described as a ‘stealth’ raid on working Britons, is expected to see millions more people pay more in tax over the coming years.

But Mr Hunt suggested this was a ‘better way’ to boost the Treasury’s coffers than a direct increase in income tax.

‘I have never hidden from the extremely difficult decision we took – extremely difficult decision for me as a Conservative because we want to bring down tax rates,’ he told the committee.

‘I happen to think this is a better way of doing it. I have never hidden the fact that we have extended the threshold freeze.

‘What I would simply say is the Conservative approach is that we bring down taxes when we can, but always in the context of being responsible about public finances.’

Mr Hunt also warned of another looming increase in the burden on Britons as he refused to rule out a huge hike in fuel duty next year.

The Chancellor used this month’s budget to announce he was keeping last year’s 5p cut in fuel duty and abandoning an inflation-linked rise.

It was the 13th consecutive freeze in fuel duty by Conservative chancellors. 

But Mr Hunt today failed to offer a guarantee that he could take the same action next year.

‘That is a decision we will keep under review and we will make a decision at the next Budget and it will be decided on the basis of the room we have in our fiscal forecast,’ he said.

Asked whether it was a ‘fiction’ that fuel duty would ever rise – despite it being forecast in Budget documents each year – the Chancellor added: ‘We don’t know. We haven’t made any decisions. I don’t agree that it’s a fiction.

‘The cost of making it a permanent change would be a £4billion reduction in the headroom after four years. The headroom is only £6.5billion.

‘We cannot afford to make that change permanent. It has just not been an option.

‘Did I want to do it this year? Yes I did, because inflation is running above 10 per cent.’

Mr Hunt later confirmed he was seeing through the abolition of the Office for Tax Simplification, as announced as part of ex-prime minister Liz Truss’s disastrous mini-Budget in September.

‘Taxes are far too complex and there is a huge job to do to make them more simple, the Chancellor said.

‘I intend to be a Chancellor who makes progress in simplifying the tax system during my time in office.’

I will continue to make sure, in as far as I am able in every fiscal event, to try and make progress on tax simplification.’

Mr Hunt added he would take this on as a ‘personal responsibility rather than have a separate group of people who are funded to do that’.