Cuts to inheritance tax could be on the agenda next week as Chancellor Jeremy Hunt hopes to win over Tory MPs with his autumn statement.
Mr Hunt will receive the final forecast from the Office for Budget Responsibility later on Friday, amid hopes in the Treasury there is more fiscal headroom than previously expected.
Earlier this week the Chancellor said he would use Wednesday’s autumn statement to address labour supply issues and business investment, with his speech coming days after Office for National Statistics data put inflation at 4.6% in October.
Multiple reports have indicated that inheritance taxes could be cut, although no final decision is believed to have been made ahead of next Wednesday.
The Financial Times also said that the Chancellor will hope to make tax breaks for business permanent.
Conservative former chancellor Lord Ken Clarke said the cut might make the right-wing of the Tory party happy but will leave them open to “appalling criticisms”.
He told Times Radio: “Well, it’s not the tax cut I would choose. Indeed, I’m not sure he’s got any room for tax cuts.
“And choosing inheritance tax at the present time might appeal to the Conservative right, but it leaves them open to the most appalling criticisms when inflation and the state of affairs is making poorer people in this country very vulnerable indeed, giving tax relief to those families that are lucky enough to have members of it with capital above the limit through inheritance tax and pay any significant amount of tax on the inheritance.
“And I’m not sure that the economic and financial state of the country justifies it.”
Mr Hunt used the Budget in March to announce a three-year policy of “full expensing” to ensure every single pound a company invests in IT equipment, plant or machinery can immediately be deducted in full from taxable profit.
Labour and Tory MPs have urged Mr Hunt to make this a permanent change, with the Chancellor noting this would be a £10 billion commitment if implemented.
The autumn statement will form part of another crunch week for the Prime Minister, as he and ministers seek to bounce back from the blow delivered by the Supreme Court to the flagship Rwanda asylum policy.
The defeat at the country’s highest court prompted anger and frustration among restive right-wing backbenchers, many of whom have also been pressuring the Chancellor to cut taxes.
The Prime Minister offered little clue as to the contents of the autumn statement when he spoke to broadcasters during a visit to Bolsover on Friday.
Asked about scope for tax cuts, Rishi Sunak said: “Well the most important thing economically that’s happened this week is that we met the pledge that I made to halve inflation.
“Now of course I know people are still suffering, they have been, so there’s work to do but that’s an important milestone because inflation is like a tax: it makes everyone feel poorer. It puts the prices of things up, eats into your savings, your pension, and that’s why it was so important to halve inflation.
“I’ve delivered on that because I want to ease the burden on the cost of living for families.
“But that allows us now to see what other support we can provide. For example, this winter pensioners will receive hundreds of pounds of extra support alongside their winter fuel payment to help them with energy bills because we know they’re high.
“But look, this Conservative Government has delivered, we are starting to ease the burden on the cost of living.
“There’s work to do and you’ll hear more about that next week in the autumn statement.”
Ahead of next week, the Government announced a fresh welfare crackdown amid efforts to get people back into work.
Free prescriptions and legal aid will be cut off for benefit claimants who are deemed fit to work and do not seek employment, while the Treasury said digital tools will also be used to “track” attendance at job fairs and interviews under the toughened sanctions regime.
Sir Keir Starmer said he would waiting to see what is in the autumn statement before commenting on any plan to slash inheritance tax.
“We’ll have to wait to see what the government says in its autumn statement. What I want to see is a serious plan for growth,” he told broadcasters during a visit to Scotland.