Ministers propose not to cut taxes until rampant inflation is curbed

Ministers have hinted that personal tax cuts are not planned until soaring prices are brought under control as the Bank of England forecasts inflation to top 11% in the fall.

When the Bank’s Monetary Policy Committee raised interest rates to 1.25% – the fifth consecutive increase – Rishi Sunak and Michael Gove seemed to indicate that fellow Conservative MPs pushing for tax cuts would have to wait, as such measures could spur runaway inflation.

The chancellor told bank governor Andrew Bailey that fiscal policy must remain “responsible” and not “exacerbate” inflation.

I will make sure we manage our loans and debts responsibly so we don’t make things worse.Rishi Sunak

In a letter to Mr. Bailey, Mr. Sunak wrote: “This is why, in response to the urgent cost of living pressures people are facing, I have announced a series of timely, targeted and temporary measures to help households cope with real income pressures without while increasing unnecessary inflation.

Community Secretary Mr Gove later said he agreed with Mr Sunak that tax cuts should be delayed until inflation was brought down.

Asked if he would have to wait until 2024, Mr Gove told TalkTV: “The chancellor has the right policies… He can’t spend all the public money as many people would like, which is what we would like in an ideal world. to”.

He added: “You have to make sure you balance the books at the government level.”

Earlier Thursday, Mr Gove told The Times CEO Summit in London that the pressure on public finances means the government cannot provide the level of support it would like for the people.

“When you squeeze inflation out of the system, you will rely on the Bank of England and the government to carry out fiscal and monetary policy, which will inevitably mean that we will not be able to do everything that we would like in ideal circumstances. to support people in difficult times,” he said.

The cost of living has been rising for several months, with consumer price index (CPI) inflation reaching a 40-year high of 9% in April when the energy price cap was raised.

But things could get worse later this year as the Bank of England raised its peak inflation forecast for October, when energy prices could rise even more, from 10% to more than 11%.

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Chancellor Rishi Sunak told bank governor Andrew Bailey that fiscal policy must remain “responsible” and not “exacerbate” inflation (PA)

Mr. Sunak announced a multi-billion dollar bailout for needy households, most of which will come when electricity bills rise again in October.

But that could prove to be a double-edged sword of sorts, the Bank said, adding another 0.1 percentage point to the CPI in the first year.

In a TV interview, the chancellor pointed to the abolition of the threshold at which workers start paying national insurance after a few weeks, as he insisted that “the direction of the movement is to reduce taxes on the population.”

But he appeared to have dismissed further short-term tax cuts, telling ITV News: “I’ll make sure we’re responsible for our loans and debts so we don’t make things worse and raise mortgage rates more than they’re otherwise going to.” . gotta get up.”

The chancellor added that people need to be “reassured” that inflation will be curbed through “restricted borrowing and debt”, actions by the Bank of England and measures such as improved energy supplies.

“People need to be confident that we will get through this, we will bring inflation down and strong growth will return,” he said.