Chancellor Jeremy Hunt said the UK Government will increase the national living wage to at least £11 an hour next year as he hinted that public service reforms could allow him to cut taxes.
In his keynote address at the Conservative Party Conference in Manchester, Mr Hunt told delegates that the level of tax in Britain is “too high”.
The Chancellor laid out his intentions to reduce the size and cost of the civil service, claiming the move could save £1 billion a year and indicated that improving public-sector productivity could allow him to reduce the tax burden.
Although he ruled out sizeable tax cuts this year, he left open the door to the possibility of a pre-election giveaway next year as Rishi Sunak attempts to cling onto the keys to Downing Street, despite dismal opinion polls.
Mr Hunt defended his decision to prioritise cutting inflation instead of the tax cuts demanded by some Tories ahead of next year’s general election.
He said: “Right now, we are focused on bringing down inflation.
“Nothing hurts families more when it comes to the weekly shop, heating bills or pump prices, which is why the Prime Minister has pledged to halve it.
“We’re getting there – it was 11% , it’s now down by 40% – the plan is working and now we must see it through, just as Margaret Thatcher did many years ago.
“When we halve inflation, that’s not a 1% income tax cut, that’s a 5% boost to incomes compared to if it stayed the same.”
Mr Hunt added: “Conservatives will always protect public services, but we’re also honest about the taxes that pay for them.
“After a once-in-a-century pandemic and the biggest energy crisis in a generation, the level of tax is too high. We were right to protect jobs and families.”
The Chancellor told the conference that “it’s easy to support higher growth, better public services and lower taxes” but warned that it was “harder to make it happen”.
He said: “In Britain today, there’s only one party prepared to make those difficult decisions.
“Our party and our Prime Minister, whose diligence and tenacity have given us the Windsor Framework, the Atlantic Declaration, the Trans Pacific trade deal, and the NHS workforce plan, whose own life story shows just what’s possible with education, aspiration and hard work.
“His story and our story: more growth, more jobs, more doctors, more nurses, better schools, less poverty, less crime.
“It’s time to roll up our sleeves, take on the declinists and watch the British economy prove the doubters wrong.”
But he told delegates that in order to “make sure work continues to pay”, the Tory Government intended to raise the voluntary national living wage.
He said: “Since we introduced it, nearly two million people have been lifted from absolute poverty after housing costs, not by tax credits, or benefits, but by removing the barriers to work, boosting salaries, cutting tax, making work pay.
“We promised in our manifesto to raise the national living wage to two-thirds of median income, ending low pay in this country.”
Mr Hunt added: “At the moment, it’s £10.42 an hour and we’re waiting for the Low Pay Commission to tell us next year’s recommendation. But I confirm today, whatever that recommendation, we will increase the national living wage to at least £11 an hour next year.
“That’s a pay rise for two million workers and the wages of the lowest paid over £9,000 higher than they were in 2010 because if you work hard, a Conservative government will always have your back.”
The Chancellor stressed that his strategy to calm the economy will require “a more productive state, not a bigger state”.
He said: “If we increase public sector productivity growth by just half a per cent, we can stabilise public spending as a proportion of GDP.
“Increase it by more and we can bring the tax burden down. Half a per cent – now for those of us with private-sector backgrounds, that doesn’t seem too much, does it?
“In the public sector, I’m telling you it’s harder. But we are up for the challenge.”