Jeremy Hunt: The best tax cut we can give is halving inflation

Jeremy Hunt - Heathcliff O'Malley for The Telegraph
Jeremy Hunt - Heathcliff O'Malley for The Telegraph

A huge portrait of William Gladstone, the great Liberal prime minister and four-time chancellor, looms over Jeremy Hunt’s study in Number 11 Downing Street, a gift from past Treasury mandarins.

It faces a much smaller photograph of Nigel Lawson, the tax-cutting chancellor thought by many Tories to have held the true flame of Thatcherism, on the wall behind the current Chancellor’s desk.

For Mr Hunt, the Lawson photograph is the most significant. It was put up by Rishi Sunak when he was chancellor and stands as testament to the pair’s intention to cut taxes – but not just yet.

“It’s not just me that wants to cut tax. The Prime Minister wants to cut tax as well. But the best tax cut we could give the British people would be to halve inflation,” he told The Telegraph’s Chopper’s Politics podcast. “That is a huge increase in people’s disposable income. Inflation is an invidious tax rise, which we need to get out of the system.”

Mr Hunt suggests that corporation tax, set to rise to 25 per cent in April after he reversed Kwasi Kwarteng’s decision to cut it, will be first on the list – when the country can afford it.

“If you’re saying to me do I want to get taxes down, yes, I do. If you’re saying where would I prioritise, my first priority would actually be to bring down business taxes,” he said.

“We already have the second lowest business taxes as a proportion of GDP in the G7. But we want to have the most competitive tax rates so that if people want to start a business, if they want to invest in a European country, they choose here.

He said it was “extremely painful” and “a last resort” to reverse Mr Kwarteng’s tax cuts, adding that he was sorry for calling dividend income “unearned income” in the Autumn Statement to MPs.

“I wouldn’t use that phrase again,” he said. “Low taxes are a very important part of getting the incentives right in an economy for innovation, entrepreneurism, and risk-taking.”

Mr Hunt was speaking ahead of a speech at Bloomberg in London on Friday in which he attacked “declinism” in the UK and urged Britons to take advantage of the opportunities Brexit could offer.

“If we are going to succeed in a post-Brexit world, it will be because Brexit makes us more hungry as a country,” he said. “The success of Brexit will be because it’s a catalyst that makes us get out into the world and try harder, and having competitive tax rates is a very important part of that.”

Mr Hunt said he hoped tax would become a clear dividing line with Labour at the next general election, adding: “The difference between Labour and the Conservatives is that we bring taxes down as soon as we can. Labour never does.”

With millions of Britons preparing their self-assessment tax returns ahead of Tuesday’s deadline, Mr Hunt said he would publish his tax return for his time as Chancellor because that was “the right thing to do”.

How about the rest of the Cabinet? “Everyone must make their own decision,” he said. “I am in a different position because I am responsible for the nation’s finances. There is a particular interest in the Chancellor’s tax affairs.”

For Mr Hunt and Mr Sunak, the focus this year is on getting more out of Britain’s working age population. Internal Treasury figures show that 8.9 million working age adults are not in work, 570,000 more than before the pandemic.

Not all of them can work – the figure includes students, stay-at-home mothers, carers, the long-term and short-term sick and early retirees – but Mr Hunt hopes many of them can.

The 56-year-old wants his fellow over-50s to embrace the “third phase” of their working lives and said: “If you’re over 50, you’ve actually got time for another entirely new career in your life.

“Even if you don’t want to work full time, work can be an incredibly enriching part of that third phase of your life. We want to tap into the abilities, the skills, the experience, the wisdom of people who’ve done a lot of other things in their life.”

On the backbenches before he became Chancellor last October, Mr Hunt would raise an eyebrow when Jacob Rees-Mogg, the then business secretary, urged civil servants back to their offices. Not any more.

“Jacob Rees-Mogg had an important insight when he said that this [working from home] is not a permanent change that we want to see in the economy,” he said. “I don’t know if we need new rules, but I would like to encourage people to come into the office and meet the Chancellor face to face.”

It is a balance, he concedes, and while some can work from home, plenty of others are held back by not sharing in “watercooler moments” with colleagues.

Mr Hunt is an entrepreneur – he made a reported £14.5 million from the sale of his Hot Courses business in 2014 – and wants the UK to embrace risk-taking.

He said it was wrong, for example, to say it was a “failure” for the UK not to put satellites into space on a rocket launched from Cornwall earlier this month. Instead, it should be seen as a stepping stone to more launches.

“Too often we brand these kinds of things as failures,” he said. “I had a whole succession of failures before I had a business that took off. We are a country that aspires to greatness and wants to make a splash in the world. And if we do that, we’ve got to accept that we’re going to need to take risks.”

Mr Hunt’s support for entrepreneurs extends to Nadhim Zahawi, the embattled Conservative Party chairman, whose reported tax settlement with HMRC is under investigation in Whitehall.

“I don’t want to talk about the individual case,” he said when asked about Mr Zahawi. “But let me say this – I do want more entrepreneurs in politics. It’s a tremendous positive to have people around the Cabinet table who know what it’s like to take risks.”

Mr Hunt, who has been Chancellor for just over 100 days, said: “I wasn’t expecting to be doing this job. I thought I was all beached up. And then I got the text from Liz Truss that I thought was a hoax. I couldn’t say no to this job, because becoming an entrepreneur was the best decision I ever made.”

Jeremy Hunt - Heathcliff O'Malley for The Telegraph
Jeremy Hunt - Heathcliff O'Malley for The Telegraph

As Chancellor, he holds the pen on any new pay deals to head off more strike action by public sector unions, but warned that he could not sanction rises that would risk the target of halving inflation by Christmas.

He said: “We want to resolve these issues. We recognise people in public services work extremely hard, but we can’t agree to anything that’s going to entrench high inflation.”

The former health secretary, who said he does not pay for private health care, said he wanted to see the NHS reformed but did not want to go as far as his former colleague Sajid Javid and charge for GP appointments.

He suggested the health service could ditch the “targets culture” to give more power to local health chiefs, similar to the freedoms given to headteachers in the schools system.

“We’ve risen nine places in the international league tables for English and maths and we’ve done it by decentralising power, by allowing heads to manage. I don’t think we allow hospital managers to do that,” he said.

This feels like Mr Hunt’s last job in government. He no longer wants to lead the Tory party, saying: “That’s not going to happen, and I don’t want it to happen.”

While this year is all about getting the economy back on track, Mr Hunt allowed himself a chance to dream and said he backed The Telegraph’s campaign for a replacement for the Royal Yacht Britannia.

“I want us to be proud as a country,” he said. “Right now, when you look at the existential battle for freedom that is going on in Ukraine, our priority has to be supporting brave Ukrainians. But is it something that I would like us to see in my lifetime? Absolutely.”

Listen to the full interview with Jeremy Hunt on Chopper’s Politics, The Telegraph’s weekly political podcast, using the audio player in this article or on Apple Podcasts, Spotify or your favourite podcast app