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Chancellor Jeremy Hunt will attempt to shift attention on Monday from an escalating Conservative conference row over high levels of tax by announcing policies intended to put the Tories on the side of “workers versus shirkers”.
Hunt will seek to change the subject at a conference so far dominated by a clamour from senior Tories — including some ministers — for Rishi Sunak, prime minister, and his chancellor to cut taxes before the election.
The chancellor will guarantee that the national living wage will rise by at least £1,000 next year, meeting a 2019 manifesto commitment to increase pay for the lowest paid to two-thirds of median earnings.
Meanwhile he will promise to introduce new sanctions on benefit claimants who refuse to seek work, which Tory insiders said could be aimed at up to 100,000 people.
Hunt’s promise to follow the recommendations of the Low Pay Commission — which is expected to propose a rise in the hourly rate to at least £11 — is cast as an attempt to help struggling families.
The promise to toughen the sanctions regime is less well developed, but will form part of Hunt’s efforts to get more people off benefits and into work at his Autumn Statement.
“Around 100,000 people are leaving the labour force every year for a life on benefits,” he said, adding that it was a “fundamental matter of fairness” to ensure that people who were not looking for work received lower benefits. One Tory official characterised the policy as “workers versus shirkers”.
Hunt’s address to party members in Manchester on Monday will come shortly after Liz Truss, former prime minister, makes the case for radical tax cuts at a “British growth rally” on the conference fringes.
Truss, whose tax-cutting policies disastrously fell apart in the September 2022 mini-Budget, will demand a cut in corporation tax from 25 per cent to 19 per cent.
“We can’t stand idly while companies like AstraZeneca move operations abroad because of our huge tax burden or small businesses shut up shop because they are drowning in red tape,” she will say.
Sunak on Sunday declined repeatedly to guarantee tax cuts before an election, expected next year, arguing that cutting inflation was the “biggest tax cut” that he could make.
Hunt has warned that tax cuts in his Autumn Statement are “virtually impossible”, arguing they would complicate the fight against inflation and were unaffordable at the moment.
Hunt’s spring Budget is seen as the likely moment for a pre-election giveaway, but many Tory activists and MPs are growing impatient.
Michael Gove, levelling up secretary, ratcheted up pressure on Sunak and chancellor Jeremy Hunt to go further, telling Sky News: “I would like to see the tax burden reduced before the next election.”
As the government considers cutting inheritance tax as a potential pre-election giveaway, Gove issued a warning to Downing Street to focus tax cuts instead on helping workers rather than wealthier and older voters.
“My own view is, wherever possible, we should cut taxes on work,” Gove said. “In other words, we should incentivise people to work harder, we should make sure they are better rewarded for the enterprise, the effort, the endeavour that they put in.”
His intervention came after the Institute for Fiscal Studies think-tank warned this week that taxes were on course to increase by £3,500 per household since 2019, a record rise for any parliament.
Truss is one of 33 Tory MPs to sign a pledge to their constituents vowing not to support any further tax rises, in a sign of growing restlessness in the party on the issue.
Meanwhile another group of rightwing MPs is set to heap pressure on Sunak to raise the threshold at which VAT is levied from £85,000 — where it has been frozen since 2017 — to £250,000.
The New Conservatives, led by rising stars of the 2019 intake of Tory MPs Danny Kruger and Miriam Cates, will demand the tax cut for small businesses at a rally in Manchester on Monday afternoon.