Cut taxes now or the Tories will lose the next election, Jeremy Hunt has warned

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Chancellor Jeremy Hunt has been warned the Tories risk defeat in the next election and will ‘sink without a trace’ unless he cuts taxes in the next budget in March.

Ministers are pushing for tax cuts this year amid emerging signs of easing inflation and economic resilience – although rising costs of everyday goods and services continue to cripple Britain’s pockets.

Hopes are growing that Mr Hunt can ease the burden on Britons by autumn, with senior Tories warning that action must be taken to give the struggling party a fighting chance at the polls in 2024.

But Treasury reportedly virtually ruled out tax cuts in March budgetMr. Hunt emphatically asserting that inflation must be tackled first.

Chancellor Jeremy Hunt has been warned the government will ‘fall without a trace’ in the next election unless it introduces tax cuts

Sir Iain Duncan Smith said the Tories

Sir Iain Duncan Smith says the Tories ‘will have no hope’ of winning next election without tax cuts

It is understood that the Treasury is currently planning a ‘light’ budget, with Mr Hunt warning that public finances will not be in better shape than in November when he raised taxes in the wave of economic chaos following the doomed government of Liz Truss.

But senior Tory MPs are sounding the alarm and tonight warned the party must return to its tax-cutting roots if it is to have any hope of winning the next election.

The Tories have trailed Labor in the polls for months after a series of scandals including Partygate, the Owen Patterson scandal and the publication of the Sue Gray report.

Former leader Sir Iain Duncan Smith said: “We need to get growth going again. This government will sink without a trace if we don’t get growth by the middle of this year – we won’t have any hope of winning the election.

“We are already overtaxed and clearly we cannot impose ourselves in a recession.

“If we want to get rid of the so-called black hole, we have to get growth and, in the position we’re in right now, that will require tax cuts.”

“The idea that we could persist with a consistently high tax approach is simply unsustainable.”

Inflation fell slightly in December after hitting a 40-year high in October

Inflation fell slightly in December after hitting a 40-year high in October

GDP data also held up slightly better than analysts had expected, potentially avoiding a technical recession in the final quarter of 2022.

GDP data also held up slightly better than analysts had expected, potentially avoiding a technical recession in the final quarter of 2022.

The Tories have lagged far behind Labor in the polls for months

The Tories have lagged far behind Labor in the polls for months

Is inflation finally down? The CPI rate fell in December

Ministers welcomed signs that inflation is finally down today after the headline figure fell.

The CPI annual rate was 10.5% in December, down from 10.7% the month before, as falling fuel prices helped ease the pain for Britons.

It is the second straight decline for the index, with experts suggesting the peak has passed after the 40-year high of 11.1% in October. That could ease pressure on the Bank of England to keep raising interest rates – although another hike in a fortnight looks inevitable.

However, Chancellor Jeremy Hunt has warned there can be no letting up in efforts to tackle the curse of soaring prices. Ministers also pledged to stand firm in the face of a wave of public sector strikes, saying caving in to demands for double-digit pay rises would risk reversing progress.

Sir John Redwood also warned that tax cuts were essential – and said some could even boost overall incomes by triggering growth.

Sir John said: ‘I am very pleased to hear that the new government wants some growth.

“We can’t solve the growth problem without some tax cuts. They have to be affordable, of course, but the best way to reduce borrowing and increase income is to grow the economy.

Privately, Tory MPs have already begun to lobby the Chancellor to reduce the tax burden, including by keeping the fuel tax due to rise by 12p a liter in March.

There are rumors that Liz Truss could make her first parliamentary intervention since leaving 10 Downing Street last year to plead for lower taxes.

But it remains to be seen how that would play out across the House after his economic policies during his short time as prime minister caused markets to crash.

It comes as today’s figures show the headline CPI has finally fallen from 40-year highs, with a rate of 10.5% on the year to December.

GDP data also held up slightly better than analysts had expected, potentially avoiding a technical recession in the final quarter of 2022.

Conservatives think the government should have a bit more leeway after lower energy costs, thereby reducing the household subsidy bill.

A senior minister has told MailOnline that Rishi Sunak and Mr Hunt will make the decision, but a likely election in the second half of next year is expected to focus tempers. The tax cuts could help bolster Rishi Sunak’s standing and morale in Parliament’s tough past year.

The minister said there were “reasons for hope, with the economic data improving slightly”.

“Bills are starting to subside, inflation could come down,” they said.

“If we can save money on things like the energy bill scheme, if the economy is stronger because we’ve stabilized the government, then maybe we can get back to the tax cut issue soon. “

They added: “It’s a narrow path. We need a better economy, persuading people to trust us with the NHS. We may have to get lucky with Ukraine and hope Starmer makes some mistakes.

“But it’s all about momentum. If we go into 2024 putting money back in people’s pockets, everything will be at stake.

A Treasury source insisted tackling inflation was Mr Hunt’s ‘priority’.

“We want low taxes and a sound currency. But sound money has to come first because inflation eats away at the pound in people’s pockets even more insidiously than taxes,” they said.

However, they acknowledged that the Bank of England predicted the Prime Minister’s target of halving inflation could be achieved by the final quarter of the year.

The CPI annual rate was 10.5% in December, down from 10.7% the month before, as falling fuel prices helped ease the pain for Britons.

Falling fuel prices were a major contributor to the headline CPI decline in December

Falling fuel prices were a major contributor to the headline CPI decline in December

This benefit has been partly offset by the continued spike in food prices.

It is the second straight decline for the index, with experts suggesting the peak has passed after the 40-year high of 11.1% in October. That could ease pressure on the Bank of England to keep raising interest rates – although another hike in a fortnight looks inevitable.

However, Mr Hunt warned that there could be no letup in efforts to tackle the curse of soaring prices. Ministers also pledged to stand firm in the face of a wave of public sector strikes, saying caving in to demands for double-digit pay rises would risk reversing progress.

Speaking after the figures were announced this morning, Mr Hunt said: ‘There is no room for deviation from our central target for the year, which is to halve inflation , in order to deal with, for example, the anger of public sector workers who are seeing their pay eroded, we are dealing with the pressure that retirees are under when doing their weekly shopping, the pressure on companies that are sometimes worried for their viability.

“That must be our central mission and that is why the Prime Minister has nailed his colors to the mast and said we are going to halve inflation over the next year.”

The Office for Budget Responsibility said the November budget would raise the overall tax burden to 47% of GDP this year, up from 39% before the pandemic and the highest level since World War II.

The row comes at an awkward time for the Chancellor, who was mocked online today for a new video in which he tries to explain inflation using several disposable coffee cups.