Jeremy Hunt faced down Tory backbenchers demanding radical tax reductions today as he pledged to transform ‘British genius and hard work’ into long-term prosperity.
The Chancellor signalled his determination to bring down sky-high inflation despite clamour for rate cuts to boost growth.
Setting out a plan for growth, the Chancellor hit out at the ‘declinism’ peddled by Labour and say this country is well placed to exploit ‘the growth sectors which will define this century’.
He insisted that downbeat projections from gloomy forecasters ‘do not reflect the whole picture’ and argue that the economy is standing up well against global rivals.
But after an introduction written for him by AI software, he took aim at his Tory critics.
In a speech at Bloomberg’s London HQ, Mr Hunt said: ‘My party understands better than others the importance of low taxes in creating incentives and fostering the animal spirits that spur economic growth.
‘Another Conservative insight is that risk-taking by individuals and businesses can only happen when governments provide economic and financial stability.
‘So the best tax cut right now is a cut in inflation.
The Chancellor signalled his determination to bring down sky-high inflation despite clamour for rate cuts to boost growth.
Jeremy Hunt, pictured on January 25, will pledge to transform ‘British genius and hard work’ into long-term prosperity
Setting out a plan for growth, the Chancellor is to hit out at the ‘declinism’ peddled by Labour. Starmer is pictured on January 25 at PMQs
‘And the plan I set out in the autumn statement tackles that root cause of instability in the British economy.
‘The Prime Minister talked about halving inflation as one of his five key priorities and doing so is the only sustainable way to restore industrial harmony.’
But he went on to admit taxes must be lowered to attract investment and pledged to put ‘restraint on spending’.
‘High taxes directly affect the incentives which determine decisions by entrepreneurs, investors or larger companies, about whether to pursue their ambitions in Britain.’
He added: ‘Our ambition should be to have nothing less than the most competitive tax regime of any major country. That means restraint on spending’
‘In case anyone is in any doubt about who will actually deliver that restraint to make a low tax economy possible, I gently point out that in the three weeks since Labour promised no big Government chequebook they’ve made £45 billion of unfunded spending commitments.’
Making ‘the case for optimism’, he claimed EU red tape has held back investment and productivity but future growth can be ‘built on the freedoms which Brexit provides’.
Shadow Chancellor Rachel Reeves said: ‘Britain has so much potential.
‘From creating good, new jobs in the industries of the future, to making our country the best place to start and grow a business, Labour’s proper plan for growth will grasp those opportunities and make our economy stronger to face up to the challenges.
‘Thirteen years of Tory economic failure have left living standards and growth on the floor, crashed our economy, and driven up mortgages and bills.
‘The Tories have no plan for now, and no plan for the future. It’s time for a Labour government that will build a better Britain.’
Mr Hunt told a Cabinet ‘awayday’ at Chequers yesterday that the Government could meet Rishi Sunak’s pledges to halve inflation, kick start growth and rein in debt.
But he warned it would require tight control over spending, including resisting union calls for pay rises that could fuel price rises.
Mr Hunt pledged a relentless focus on key industries of the future in which the UK has a ‘competitive advantage’, such as digital technology, green industries, the life sciences, advanced manufacturing and the creative sector.
‘Our plan for the years that follow is long-term prosperity based on British genius and British hard work … and world-beating enterprises to make Britain the world’s next Silicon Valley,’ he said.
Mr Hunt told ministers yesterday that he believes the economy will be out of recession and growing again by autumn – and inflation will be significantly lower.
In his speech today, he argued that, although UK growth has slowed since the financial crash, it has remained ahead of France, Japan and Italy – and point out that the economy has kept pace with Germany’s since the EU referendum.
‘Declinism about Britain is just wrong. It’s always been wrong in the past, and it’s wrong today,’ he said.
‘Some of the gloom is based on statistics that don’t reflect the whole picture. Like every G7 country, our growth was slower in the years after the financial crisis than before it.
‘But since 2010, the UK has grown faster than France, Japan and Italy. Not at the bottom, but right in the middle of the pack.
‘Since the Brexit referendum, we’ve grown at about the same rate as Germany. Yes, we’ve not returned to pre-pandemic employment or output levels, but an economy that contracted 20 per cent in a pandemic, still has nearly the lowest unemployment for half a century.
‘Whilst our public sector continues to recover more slowly than we would like from the pandemic strengthening the case for reform, our private sector has grown seven and a half percent in the last year.
‘Yes, we’ve not returned to pre-pandemic employment or output levels, but an economy that contracted 20% in a pandemic, still has nearly the lowest unemployment for half a century.
‘Whilst our public sector continues to recover more slowly than we would like from the pandemic strengthening the case for reform, our private sector has grown seven and a half percent in the last year.’
The Mail revealed yesterday that Mr Hunt will scrap EU rules that prevent pension funds and insurance firms from investing in infrastructure, potentially releasing £100billion in private sector investment over the next decade.
Mr Hunt told a Cabinet ‘awayday’ at Chequers yesterday that the Government could meet Rishi Sunak’s pledges to halve inflation, kick start growth and rein in debt
He will also highlight reforms to City regulation and plans to review more than 4,000 EU laws still on the statute book.
A Whitehall source said: ‘Britain is already diverging from the EU. It is not just about us tearing up their laws in places where they no longer suit our needs, it is also the fact that they have kept regulating at a relentless pace.
‘Brussels churns out new regulations every single day, but we are no longer obliged to follow them. Each time that happens, the divergence grows.’
The Chancellor will set out the need to get four million people of working age back into employment to help tackle labour shortages that are fuelling inflation and hampering the economy.
A source said businesses had to accept the need to invest in training now that the era of EU free movement was over.
Mr Hunt has told friends he wanted to echo the approach of Margaret Thatcher’s first chancellor Geoffrey Howe, who was criticised in 1981 for raising taxes in a recession but was ultimately vindicated.
A source said: ‘Jeremy wants to tell people the truth, in the same way Geoffrey Howe did. Labour’s last chancellor Denis Healey was endlessly saying that everything was great at the end of the 1970s and in the end people stopped believing him.
‘Geoffrey Howe came in and told the truth. It wasn’t always popular but it meant that when he was able to say that things had turned a corner, people believed him.’
The Chancellor called for a new focus on the ‘four Es’ – enterprise, employment, education and ‘everywhere’, which is code for levelling up.
He will argue for a push to revive Britain’s ‘risk-taking’ entrepreneurial culture. And he will pledge action to tackle the scandal that sees 100,000 children leave school each year unable to read or write.
Conservative MPs and business leaders have piled pressure on Mr Hunt to use the March Budget to start reducing Britain’s record tax burden. But sources say he will argue that the Conservatives first have to rebuild their reputation for ‘sound money’, as well as meet the Prime Minister’s vow to halve inflation this year.
An ally said last night: ‘Jeremy’s view is that Labour will always put taxes up, whereas the Conservatives will cut taxes when they can.’
The Chancellor will also accuse Sir Keir Starmer of failing to restrain Labour’s high spending instincts.
The Prime Minister’s Cabinet awayday at Chequers yesterday focused on delivering on his key pledges and drawing up a strategy for the next election.
Polling guru Isaac Levido told ministers there was still a ‘narrow path’ to victory, but warned this would require an end to Tory infighting and a relentless focus on delivering on Mr Sunak’s five pledges.
These include reviving the economy, cutting NHS waiting lists and stopping Channel migrants.