Rishi Sunak has refused to rule out further tax rises as he faces pressure from within the Conservative Party about the historically high tax burden.
In his first in-person speech to the Tory party conference as Chancellor, Mr Sunak did not dismiss the possibility that increases to income tax or council tax may be imposed.
“Yes, I want tax cuts. But in order to do that, our public finances must be put back on a sustainable footing,” he said, warning that public debt was now nearly 100 per cent of GDP.
He is set to commit more than £500 million in fresh funding to help people back into work as he seeks to stem the continuing turbulence of the coronavirus pandemic.
Mr Sunak is shifting the focus on to getting people into new or better jobs as the Government comes under sustained pressure over a major squeeze on living standards.
But the extra funding comes as Mr Sunak and Boris Johnson are under pressure from within the Tory ranks about the historically high tax burden, after they raised national insurance contributions by 1.25 percentage points.
The Chancellor was asked repeatedly on Monday about whether he would approve further tax increases, including a hike to council tax to help fund social care after a warning from local authorities.
Mr Sunak told Sky News he would not “pre-empt” the local government finance settlement later in the year and added to LBC he “never can comment about future tax policy”.
Asked about a possible increase to income tax before the next election, he told BBC Breakfast: “Recently we did make a significant announcement on tax and it was a difficult decision to make, especially for a Conservative Chancellor and a Conservative Prime Minister.
“But we took that decision because we wanted to make sure the NHS got the significant funds it requires to help recover strongly from coronavirus.”
Funding for the new jobs package in his conference speech will not be set out until the spending review and Budget later this month.
Jacob Rees-Mogg, the Commons Leader, has warned that taxation has hit “the limit”.
Mr Sunak suggested it was his duty as Chancellor to tell the Prime Minister not to overspend after joking that he would cut up Mr Johnson’s “credit card” to rein back his public spending.
“That was an old thing but I think that’s something all chancellors say as part of our job,” Mr Sunak told BBC Radio 4’s Today programme.
Mr Sunak was also forced to defend the decision to end the £20-a-week uplift to Universal Credit as families and workers face financial hardship, in a move some Tories have campaigned against.
And he conceded it was likely there would be shortages this Christmas, as the strains of coronavirus were compounded by a shortage of workers stemming from Brexit.
“We’re seeing supply disruption not just here but in lots of different places and there are things we can try and mitigate and we are,” Mr Sunak told Today.
“But we can’t wave a magic wand. There’s nothing I can do about the decision by a country in Asia to shut down a port because of a coronavirus outbreak.”
In his conference speech, Mr Sunak announced the new funding will be used to help workers leaving the furlough scheme and unemployed over-50s back into work.
The “kickstart” scheme helping young people on Universal Credit will be extended to March next year under the measures and the £3,000 incentive for new apprentices will be extended until the end of January.
But the Chancellor’s speech comes at a difficult time for the economy, with warnings of a cost-of-living crisis for some households who face rising energy bills, price hikes in shops and a cut to Universal Credit.
Household budgets will sustain a further blow next April when national insurance contributions rise by 1.25 percentage points to help fund the NHS and social care.
Shadow work and pensions secretary Jonathan Reynolds said the package “will do nothing to compensate for the Chancellor’s tax rises, cost-of-living crisis and cuts to Universal Credit which are set to hammer millions of working families”.