Chancellor warns of ‘difficult decisions’ on benefits as he mulls inheritance tax cut
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.
Impact
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.
Tax cuts
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”.
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Reform the welfare state means streamline it, make it more difficult to access and cut out those who really need it. All to meet the cost of inheritance tax in the hope of gaining a few extra votes next year. They’ll do anything to widen the inequality in this country.
Quote: “difficult decisions to reform the welfare state”. Never any “difficult decisions to reform the stinking bloody rich” though!!
‘Difficult decisions’ to make on benefits says Hunt. Difficult for whom you wonder? Benefits are paid to the working poor, the disabled, the sick etc. Groups of people who are already going cold, hungry and homeless because of poverty wages and benefits. They will clearly suffer even more. No difficulties caused Hunt or his rich pals. No difficulties for the tax dodgers who cost the economy approx £37 billion each year.
Its only the poorest who will suffer as Hunt gives them yet another good kicking. Shame on him
Those who are “seriously rich” already avoid IHT because they can afford the kind of advice that takes them through all sorts of legal loopholes that have been left in our tax system for that specific purpose. It involves very early machinations using an array of “tools”. It excludes most people who have worked all their lives before dying during their retirement. Many of them now live in houses worth over £250k and possibly have other assets worth £100k all of which takes their estates into taxable territory. In the meantime Hunt’s chums are worth 100’s of times as much… Read more »
The only aspect of the decision that is difficult for them, is deciding just how much in cuts they can get away with.
They’re not difficult decisions.
We all know they will punish the unemployed and the poor and will gift tax cuts to the wealthy, claiming wealth with trickle down. But the wealthy will hoard it.
Same as every other time in history
Quote: “Aristocrats were killed in the French Revolution because of the anger felt by the masses of poor French citizens. The aristocrats were viewed as living extravagant lifestyles while people were impoverished, suffering, and starving in the country.” I’m not saying that killing wealthy people was a good idea but one can easily understand the common man’s anger when they were squeezed and squeezed for taxes to keep the rich in “extravagant lifestyles” for doing very little. Time for Hunt to look towards the rich in the UK.
In the context of the French Revolution killing the super wealthy probably was for the best.