Jeremy Hunt is preparing a path to tax cuts before the next election that relies on reduced spending by the state, it has been revealed.
The Chancellor will say in a speech next week that the only way to slash taxes is to bring down the cost of Government, amid concern over rising borrowing.
Mr Hunt will warn all offices – except the Department of Health and the Ministry of Defence – that they will face harsh spending cuts.
A Treasury source has said: “Jeremy believes it is time to make the argument that the size of the state has grown too big relative to the size of the economy.
“No one wants a return to austerity, so we need to find a way of raising productivity in the public sector significantly in order to get more for less.
“Until the economy is growing faster than state spending, it is very difficult to make serious inroads into reducing the overall tax burden, which everyone wants to see.”
One minister, speaking at the Northern Research Group conference yesterday, said tax cuts before the next election are a “no brainer”.
And Ben Houchen, the Mayor of Tees Valley, said: “The state is growing at over two per cent, growth is at 1.6 per cent. That is not fiscally responsible. So we need to grow the economy and make sure the economy is growing faster than the size of the state.”
It comes as the Prime Minister rallied party members, insisting the Conservatives can win the next election “if we can keep our focus and our unity”.
Rishi Sunak spoke during the NRG conference at Doncaster Racecourse, declaring himself a “Prime Minister for the North”.
Mr Sunak said the path to No10 is through the former Labour heartlands.
He told Tory members that many voters in the North of England “lent us their vote” at the 2019 General Election.
Mr Sunak insisted the Conservative Party must “show them that we are worthy of their trust and support by delivering for them”.
He said: “The point of being in government is to make life better for people. That is what matters. I know that our opponents want to drag us down rabbit holes into old arguments. To distract us by trying to turn politics back into a soap opera.
“But we must resist that temptation because the stakes are too high.
“Things are tough right now, people are frustrated. But I know they’re willing to give us the credit if and when we get results, because that’s what they want most above party politics, to believe that politicians can still get things done – that Government can actually work for them, not just indulge itself.
“If we can keep our focus and our unity, I promise you, we can and we will win.”
The PM declared there was “no route to electoral success” for his party without the former Labour heartlands won by Boris Johnson in 2019.
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Some Conservatives fear the party will struggle to retain some of the so-called “red wall” seats at the next election.
The Conservatives previously gained dozens of votes in seats held for decades by Labour as supporters abandoned the party over Jeremy Corbyn’s plans for Britain.
Mr Sunak said that his party believed in a “fair deal for the North” as he hailed the creation of a Darlington Treasury campus and boosts to local rail networks.
And, outlining his vision, he said: “I want thriving towns. I want a country where you do not have to leave the place you love in order to succeed.
“I have told the Cabinet I want them to focus relentlessly on delivery. I know that many voters here lent us their vote.”
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