The prime minister has appointed a new cost-of-living tsar to work with businesses on how to help vulnerable customers
The prime minister is concerned that a broader tax cut could fuel inflation further in the coming months, with Rishi Sunak likely to focus on cutting corporate taxes instead.
UK households will not get tax cuts this year even as they face another rise in interest rates, Boris Johnson has hinted after it was revealed the economy contracted in April.
UK GDP fell 0.3 percent in April as households cut spending, but the Bank of England is expected to hike interest rates to 1.25 or 1.5 percent later this week to try to stem inflation .
Mr Johnson has appointed a new “cost-of-living czar” to persuade businesses to help with the crisis, for example by offering discounts and free children’s services to vulnerable customers.
And the Commerce Department has commissioned a review of rip-off gasoline prices as well as upcoming reforms aimed at lowering the cost of technology.
However, Mr Johnson and Mr Sunak remain under pressure from Conservative MPs to cut taxes as quickly as possible after raising the overall tax burden to its highest level in decades.
Andrew Griffith, the No. 10 policy chief, said that “tax cuts are now a ‘when’ not an ‘if'” and urged the Tories to draw political capital from raising Social Security thresholds, which would give most workers about £330 a year year would save from July.
Asked when he would go further, the Prime Minister said: “Obviously I understand that we need to reduce taxation and we certainly will, but we have an inflationary spurt that we are now going to have to endure.” A source close by Mr Johnson said he was concerned that giving way to backbenchers would only boost consumer demand, particularly among the relatively wealthy, and worsen the inflation problem in the short term.
The Chancellor will announce a series of reforms and cuts to corporate taxation in the autumn budget, but has indicated he will not cut personal taxes until next year at the earliest.
The surprise drop in GDP came as all sectors of the economy — services, manufacturing and construction — contracted. The government said growth would have remained positive if free Covid-19 testing had not been withdrawn, which previously led to an artificial surge in numbers.
The new czar, Just Eat founder David Buttress, will make efforts on Tuesday to work with companies that could help households through initiatives such as summer activity programs for children from poorer families, as well as targeted discounts on essential products.
Petrol dealers also face a three-week investigation by the Competition Authority to see if they used the 5p fuel tax cut to boost their own profits rather than lower prices. And Economy Minister Kwasi Kwarteng is working on a plan to decouple electricity costs from global gas prices given the increasing use of renewable energy in power generation. A source said: “The system is outdated and getting worse every year, but it is extremely complex to fix.”