PARIS (Reuters) – British Prime Minister Rishi Sunak said on Friday that his government would prioritise reducing the country’s debt over cutting taxes in next week’s budget, which would also focus on other goals such as reducing inflation.
Sunak has sought to restore Britain’s fiscal credibility after the tax-cutting plans of his predecessor Liz Truss sparked a crisis in Britain’s bond market and forced her resignation in October, propelling him into Downing Street.
But some in his Conservative Party are keen for tax cuts in the budget on Wednesday, so that they can take effect well ahead of the next national election, expected next year.
Asked if he was comfortable that the tax burden was near a record high, and if he would prioritise cutting taxes as the economic picture improved, Sunak said: “Over time, I’ve been very clear my ambition is to cut people’s taxes.”
But while he said better-than-expected growth data released earlier on Friday showed the economy’s fundamentals were strong, he added that the COVID-19 pandemic and the impact of the war in Ukraine had had “a major damaging impact not just on the economy but on our public finances”.
“The economic priorities are to halve inflation, reduce debt and grow the economy. Those are the right priorities and I’m confident that the chancellor’s budget will deliver on all of those,” Sunak told reporters on a trip to Paris.
“That is the focus of our policy and that’s the thing that people want to see … halving inflation is critical.”
Britain’s inflation rate is widely expected to fall as the impact of last year’s surge in energy prices fades. The Bank of England forecast last month that inflation would fall to 3.0% in 12 months’ time, down from 10.1% in January.
“Inflation is the worst tax of all,” Sunak said. “That’s what’s causing everyone the problems, so actually, it’s right that we focus on reducing inflation and our plans are working and it’s important we stick to them.”
(Reporting by Alistair Smout; editing by David Milliken)
By Alistair Smout
