Chancellor told: ‘Tax cuts could bring down prices and boost growth…’

Senior Tories claim the Chancellor has been given bad advice and have drafted a package of targeted reductions to fire up the economy.

They include cutting VAT on energy and fuel VAT by 5%.

Easing the tax burden on November 22 is still seen as “unlikely” but possible. A Treasury source said: “I don’t think we’ll be in the position to do any tax cuts at the autumn statement. It all depends on forecasts over the coming weeks.”

Former Secretary of State for Wales Sir John Redwood has drawn up the measures he believes will bring down prices and help generate growth.

Sir John said: “The advice has been completely wrong on taxes and inflation. We need targeted tax cuts immediately.”

His suggestions include the 5% VAT cut on gas and electricity bills and 5% off petrol prices.

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The resulting black hole in finances would be filled by a “proper freeze” on civil service recruitment, forecast to generate £2.5billion in the first year. Sir John urged the Chancellor to announce a rise in the VAT threshold on small businesses.

He claimed many such firms “turn down work” once their turnover hits £85,000.

That would help bring down prices by boosting the supply of services.

Sir John also recommended measures to help the self-employed after “punitive” changes over the last six years led to a reduction of 800,000 workers. The move would generate extra tax revenues, he added.

And he called for called for the 38% of shares in NatWest still owned by the state following the financial crash of 2008 to be sold.

Sir John, who served in Sir John Major’s Government, said Mr Hunt had been advised that tax cuts are inflationary.

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However, he argued they could actually help bring down living costs by increasing supply if targeted correctly.

He said: “A no-change budget is not the answer.

“The Bank of England drove inflation by printing money into the [Covid] recovery, not the private sector. I’m very frustrated by the advice being given.

“The economic advice is wrong, full stop.”

Mr Hunt is under mounting pressure to cut taxes from Tory backbenchers frustrated at the sluggish economy.

Business leaders have also raised concerns about the tax system, which they warn is hitting the high street and fuelling housing market problems.

Sir Nigel Wilson, group chief executive of Legal & General, said there were millions of unused bedrooms in homes across the country but stamp duty makes it too expensive for many older homeowners to downsize.

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The tax is charged at 5% between £250,001 and £925,000 and hits 12% if the value of a property is more than £1.5million.

Sir Nigel said: “Too many people have no home, or one that is not adequate for their needs. These are complex problems with no easy solutions.

“However, one positive step the Chancellor could take is to remove or reduce stamp duty for older people who want to downsize. That, too, would free up housing for younger generations. Moving is expensive and being forced to pay stamp duty to buy a new home for retirement only adds to the barriers that keep older people in properties that are no longer suitable.”

No10 took the unusual step over the weekend of saying Mr Hunt would not be moved from his post and that he will remain until spring.

It had been suggested the South West Surrey MP, who has an 8,800 majority over the Lib Dems, could stand down at the next election.

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