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Low Tax Conservatives Want Chancellor To Focus Cuts On “Squeezed Middle"

(Alamy)

4 min read

Leading figures in the Conservative Growth Group (CGG) are calling on Chancellor Jeremy Hunt to cut inheritance tax and reform income tax bands which they argue would help the “squeezed middle”.

But Hunt has so far played down the prospect of cutting taxes at next month's budget, due on 6 March, after the International Monetary Fund (IMF) warned the UK needs to focus on securing the public finances. In the Autumn statement Hunt announced a cut in National Insurance (NI) from 12 per cent to 10 per cent. 

Former cabinet minister Ranil Jayawardena, Conservative MP for North East Hampshire, claimed the Conservatives have already helped the “lowest paid”, but that it was now important for Government to focus on lifting middle-income workers out of higher tax brackets.

“The Conservatives have helped the lowest paid by taking them out of tax altogether and cutting NI too, so it is right that we now help the squeezed middle – the police sergeants, experienced schoolteachers and junior doctors – who shouldn’t be paying 40 per cent tax, by lifting that threshold,” Jayawardena said.

He felt it was vital to reform income tax to make it “family friendly”. “Married couples and civil partners should have fully transferable income tax allowances, which would particularly help working age parents with children, when a family’s finances are tested the most,” he said. “Let’s reward people who are trying to do the right thing.”

The UK currently has historically high levels of tax, according to Office for Budget Responsibility (OBR). Tax revenue as a percentage of GDP has increased from 32.64 per cent in 2000 to 35.30 per cent in 2023, according to OECD data. A number of Conservative MPs are as a result putting concerted pressure on the Chancellor to cut taxes ahead of this year's general election which the Conservatives are currently expected to lose. A YouGov poll published on 1 February showed Labour were 21 points ahead of the Conservatives. Labour led the Tories on every age group except those over 65.

Another policy Jayawardena and the CGG have campaigned on for months is scrapping inheritance tax – which they have called the “death tax”, which is believed to be very unpopular with voters despite only affecting those with large amounts of wealth. 

“It’s a double tax, because it’s a tax on money which has already been taxed, and it piles on the pressure at the most sad and stressful of times," he explained. 

“If it can't be scrapped, then perhaps we should simply follow George Osborne's policy from 2007, to lift the tax-free limit to £1 million. Inheritance tax is the least popular of taxes with people of all incomes, because it is anti-aspirational, anti-family and is simply unfair.”

A Government spokesperson said more than 93 per cent of estates were forecast to not pay inheritance tax liability. They claimed the tax raises of more than £7 billion a year had helped fund public services.

“Estates of surviving spouses and civil partners can pass on up to £1 million without an inheritance tax liability – significantly more than the average UK house price of £288,000,” they said.

The mood on the Right of the Parliamentary Party is split after Hunt played down the prospects of tax cuts. But one minister hinted that they believed those on the Right may be pleasantly surprised with a series of measures, insisting that campaigners needed a “spring on the doorstep” when they were knocking on doors of potential voters. 

“For all my sort of general despondency, I've been a Conservative my whole life. I want to be able to say look [at this tax cut], we’ve done something really good there,” they said. 

A former cabinet minister, who served under Liz Truss’s short-lived premiership, said they believed the Chancellor’s downplaying of possible tax cuts could be an exercise in expectation management, but they also believed it was possible changes were as yet undecided. “I think it shows Number 10 are all over the place on messaging,” they said.

A Conservative MP in the CGG also believed the party was in deep “expectation management” mode. They claimed Hunt may be “dampening” expectations to make any future tax cuts sound “even better when they are announced".

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