Tories still want to cut taxes before the next election, Nadhim Zahawi says

The Tory party are still aiming to slash taxes ahead of the next election but don’t have ‘a hope in hell’ of doing so before inflation comes down, Nadhim Zahawi has said.

Mr Zahawi, the Conservative party chairman, said: ‘When we come out the other end of that, I’m sure Jeremy Hunt‘s priority will be to start looking at what more we can do to help people with the tax burden.’

His comments came after anger from some Conservative MPs and members because in the Autumn Statement, chancellor Jeremy Hunt raised Britain’s tax burden to the highest level since World War Two. 

Jacob Rees-Mogg is among the senior Conservatives who have criticised the £25 billion of tax rises unveiled by Mr Hunt, while former minister Esther McVey also signalled that she would be unable to vote for the Government’s tax-rising strategy.

MPs described Hunt’s decision as the ‘economics of a madhouse’ and fumed that the party has become ‘more Labour than Labour’ as a result. Mr Hunt in the aftermath of the budget insisted there was ‘nothing Conservative about ducking difficult decisions’, as he stressed the need to put UK finances on a more sustainable footing.

In a poll which was conducted by Ipsos UK for the Telegraph, it was revealed that voters are not reassured by the statement either. The data showed that almost half of the public are more concerned about the economy and their personal finances than they were before. 

It has been estimated that by the time inflation falls to its target level of around two per cent, an election could be held, as it will be May 2024. 

Although Mr Zahawi offered his support to the chancellor, he said: ‘There isn’t a cigarette paper difference between any of us around the Cabinet table because we take collective responsibility that we do want to bear down on the tax burden.

‘But we have a challenge today, which if allowed to take hold, to embed, will be deeply damaging. We wouldn’t have a hope in hell of being able to do anything to bear down on taxation if we don’t deal with inflation in the first place.’

Downing Street have been reluctant to comment on tax cuts. It comes after the chaotic markets reaction to former PM Liz Truss’s mini budget which was conducted with former chancellor Kwasi Kwarteng.

This week, a Downing Street spokesman said: ‘I’m not going to comment around an election debate… we’ve set out the plan, which is a credible and fair plan to restore economic stability.’ 

Mr Zahawi, who was a leadership contender in the summer contest to replace Boris Johnson, said Liz Truss’s mini-budget was a ‘mistake’ but that Mr Hunt’s and Rishi Sunak’s economic plans contain a ‘big slice’ of efforts to encourage growth.

He told the paper he was hopeful the party can win back the public’s trust, as he said: ‘You play as a team, because that’s how you win. If you’re divided, then you lose. And that has to be our priority.’

However, some MPs remain angry after the Autumn Statement. Three had visited constituency associations whose members were furious about tax increases. 

One backbencher said that there was previous enthusiasm after the mini-Budget conducted by Kwarteng and Truss at a dinner the next day. But the atmosphere after the Autumn Statement was much more sour and subdued, the same MP said. 

And former business secretary Jacob Rees-Mogg expressed his own concerns in the wake of the Autumn Statement.

He explained that ‘loyal’ conservative members are worried about the economy but that they want to support Sunak and want him to do well. 

Elsewhere, Sir Bill Cash, a veteran Tory, said that the Autumn Statement had left some bewildered. He described some of the economic and political decisions as things that are ‘not at all’ conservative. 

Another baffled figure was Patrick Minford. The former adviser to Margaret Thatcher said that the Autumn Statement tax decision was a ‘wrecking ball’ and said it would have a huge impact on the economy.

Meanwhile, the Government is looking at other plans for the New Year. These include ‘social tariffs’ which would affect middle class voters as vulnerable household energy bills could be subsidised through levies on bills paid by the better-off. 

Also, low-income homeowners with high mortgages could have support extended by the Treasury. This would mean that Universal Credit claimants could have access to loans after three months of struggling with payments instead of nine.

Tax take soars over £1TRILLION this year: Burden races to post-WW2 high as Hunt drags 2.6MILLION more into 40p rate and lets energy bills rise to £3,000 with UK ALREADY in recession – but delays most spending cuts until AFTER the election 

By James Tapsfield, Political Editor for MailOnline

The Autumn Statement delivered earlier this week revealed that all workers face paying more in tax as a freeze on the personal allowance, basic and higher thresholds is extended to 2028, dragging people deeper into the system by ‘stealth’. As a result 3.2million people will be liable for tax for the first time, and 2.6million more in the higher rate in five years’ time. 

Mr Hunt sought to show that the wealthy are being clobbered too, cutting the level at which the 45p top rate is due from £150,000 to £125,000 to catch another 250,000 people. 

Subsidies on energy bills are being downgraded to save money, with the average household bill rising from £2,500 to £3,000 from April. Mr Hunt argued that the energy crisis was ‘made in Russia’. 

Town halls will be freed to increase council tax by up to 5 per cent without need for a referendum.

But the bleak backdrop was the OBR watchdog forecasting that the economy is already in recession and will shrink by 1.4 per cent next year.

This year and next are expected to see the worst falls in living standards since records began in 1956, wiping out eight years of progress with unemployment surging from 1.2million to 1.7million.

Mr Hunt admitted that ‘living standards are going down’. 

‘That is the uncomfortable situation facing us and countries like Germany, who are seeing their growth forecasts go down by even more than us,’ the Chancellor told broadcasters.

He also insisted that ‘governments can’t do everything’ to protect peoples’ incomes.

The tax burden will go from 33.1 per cent of GDP in 2019-20 to 37.1 per cent in 2027-28 – a percentage point higher than forecast in March and its ‘highest sustained level since the Second World War’. 

Tax receipts are set to top £1trillion for the first time this year, rather than next as had been anticipated, largely due to the windfall tax.

A Treasury distributional analysis indicated that by next year all single-adult households earning more than £25,000 will be worse off from the measures announced today, while for families of four the figure was £59,000. 

In his Commons statement, Mr Hunt said taking ‘difficult decisions’ would mean a ‘shallower downturn’. However, he immediately faced questions about his plans as it emerged that the vast bulk of the £24billion tax increases and £30billion in spending cuts will not be felt until after the next election, expected in 2024. 

Spending is actually set to increase by £9.5billion in 2023-24, while only £7.4billion extra will have been raised from taxes. 

Among the few bits of positive news from the statement, state pensions and benefits will be increased in April in line with the 10.1 per cent inflation figure from September.

The windfall tax on energy firms will be increased to 35 per cent and kept in place until 2028. Together with a 40 per cent tax on profits of older renewable and nuclear electricity generation, that will raise £14billion next year. 

Mr Hunt said that foreign aid will not now return to 0.7 per cent of national income as planned, instead staying at 0.5 per cent until the ‘fiscal situation allows’ – potentially for the next five years. 

In a blow to the property market, the Chancellor said previously-announced stamp duty cuts will be reversed in 2025. House prices are expected to fall by 9 per cent by summer 2024, as mortgage rates head skywards. 

In another change bound to provoke a backlash, electric cars will be charged road tax for the first time. 

Although NHS budgets will be protected, other departments are facing another grim bout of austerity – albeit mostly postponed. The OBR assumed that defence spending will stay at 2 per cent of GDP from 2024, rather than rising to 3 per cent as Defence Secretary Ben Wallace has urged.  

The delicate balance allowed Mr Hunt to claim that debt will be falling as a proportion of GDP in five years’ time.

He also boasted that total spending will be higher – but the OBR pointed out that the rise from 39.3 per cent of GDP in 2019-20 to 43.4 per cent in 2027-28 is only due to higher debt interest and welfare spending and the ‘energy-shock-driven smaller economy’. 

In sharp contrast to the aftermath of Liz Truss’s mini-Budget, markets remained calm as they digested the package. Businesses said it ‘delivers stability’ but there is ‘more to be done’ on growth.

Shadow chancellor Rachel Reeves said Mr Hunt had ‘picked the pockets’ of the entire country by deploying a ‘raft of stealth taxes’. 

The stark backdrop to the Autumn Statement was new forecasts from the OBR watchdog, showing that the UK is already in recession.

It also made fresh predictions for inflation, which it was revealed yesterday has jumped to a 41-year high of 11.1 per cent.

The OBR said CPI has peaked and will average 9.1 per cent this year and 7.4 per cent next year.

Mr Hunt told MPs that ministers have to take ‘difficult decisions’ now in order to tame inflation, which he described as ‘the enemy of stability’.

He warned that the UK faces ‘a global energy crisis, a global inflation crisis and a global economic crisis’.

‘But the British people are tough, inventive and resourceful,’ he said. ‘We have risen to bigger challenges before.

‘We aren’t immune to these global headwinds, but with this plan for stability, growth and public services, we will face into the storm.’

On the prospect of a plunge in living standards, Mr Hunt admitted: ‘There is going to be a very big fall… in disposable income. But what the OBR says is the measures that I took today mitigate that, reducing the effect by around 25 per cent and that is very important.’

In another interview with ITV’s Peston show, Mr Hunt said: ‘Governments can’t do everything but we’ve done a lot and the overall impact of these changes that we’re making is that the recession that we now appear to be in is shallower than it would have been.’