ALEX BRUMMER: Hunt keeps his powder dry by holding back on tax cuts

Enthusiastic tax cutters looking for red meat in Jeremy Hunt’s Tory Party address were always going to be disappointed.

The Chancellor has been signalling for a long time that the upcoming autumn statement, scheduled for November 22, would not be the time for tax reform. Changes or reforms will have to wait until the March budget.

It should be evident to all but the most swivel-eyed advocates of lower taxation that to unveil them at a party gathering, without analysis and costings from the Office for Budget Responsibility (OBR), would have taken the Chancellor down the same disastrous route which Liz Truss took a year ago. 

Like it or not, Hunt and Rishi Sunak are captives of Treasury orthodoxy and are keeping a weather eye on inflation and bond markets.

The fact that fixed-rate mortgage deals have peaked and big battalion US fund managers such as Vanguard now see the UK as a good place to invest shows that Hunt is on track.

In his speech, the Chancellor took the opportunity to point out that the nation’s number crunchers have been wrong about the economy, which is about 2 per cent or £50billion larger than previously thought. 

A bigger and stronger economy means improved tax receipts, more robust public finances and opens the possibility of tax cuts.

For the moment Hunt is focusing on the longer term.

The ballooning of the civil service since Covid-19 is to be rolled back and that could release up to £1billion. That offers a little red meat to critics of big-state Toryism.

Of more importance over the longer haul is the Chancellor’s effort to get the UK working again.

It is great that the country appears to be nearly at full employment. But this is very misleading piece of data. It is disturbing that dropping out of the workforce so as to claim health benefits has become such an easy option for great swathes of the population. 

OBR data shows that even as the pandemic retreats, the level of inactivity for citizens outside the workforce has climbed by 440,000 since Covid struck. There are 2.6m working-age people outside the workforce for health reasons. 

Mental health is a serious problem but it is extraordinary that the UK is so out of line with its peers.

As the OBR has ventured to suggest, the generosity and ease with which health benefits are accessed contrasts with the hoops which have to be passed through for other benefits. Not working has become more profitable than putting in the long hours.

Hunt is seeking to address some of this. Improving the national living wage to £11-an-hour means the UK has one of the most generous minimum wages in the world.

The Chancellor is looking at penalising the shirkers who don’t look for work, as well as improving the pathways back into the working force for those who are inactive.

The difficulty for the Tories is that as sensible as such policies may be, the idea that generational sloth can be overcome in the short time before the next election is pie in the sky.

Nevertheless, unlocking a small part of this untapped citizenry, when there are just short of a million jobs vacancies, would ease upward pressure on inflation.

Employers could also help. There is increasing evidence for commerce that it is not just decent pay that colleagues desire, but more assured benefits such as flexible hours, bonuses, overtime for salaried workers and health care.

As for lower taxes, they will doubtless happen. Inheritance tax reform may be hugely popular but amending the freeze on tax free allowances would deliver much more spending power.

One can live in hope.

Snail mail

What an appalling dish to serve up for a King. The Royal Mail is going for broke by raising the cost of the 1st Class stamp by 14 per cent from £1.10 to £1.25, in the third rise in 18 months.

It is another inflation busting, injurious rise which can only hasten the death of the universal postal service. That Ofcom is not intervening to cap the rise, amid deteriorating standards, is inexplicable.

At the very least the Royal Mail should be obliged to display the cost of a first class stamp on the surface.

Lack of pricing transparency betrays a whole history of philately.