Rishi dodges over rumours of ‘stealth’ council tax rise

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Rishi Sunak today laid out his ‘New Tory’ vision slamming Labour’s obsession with state handouts – but defending brutal tax hikes saying it would be ‘immoral’ to let the government’s finances spiral out of control after Covid.

In his first big speech to the Tory conference – watched by Boris Johnson – the Chancellor gave an impassioned justification of his approach to ‘building back better’ as the UK recovers.

He insisted it would be fundamentally ‘un-Conservative’ to ignore the huge damage to the government’s books inflicted by the pandemic, pointing out more revenue is needed to bolster the NHS and social care. 

But he tried to quell rising anxiety about imposing the highest sustained tax burden on the economy by vowing that taxes will be slashed again once the crisis is past.

Mr Sunak also stood by the decision to axe the £20 a week uplift to universal credit, setting a stark dividing line with Labour by warning that making life better for ‘ambitious’ but struggling families cannot be just about ‘increasing their benefits’. 

He said that taking a ‘pragmatic’ stance would make the Tories the party of the ‘public sector and the private sector’. 

The set-piece in Manchester confirmed Mr Sunak’s status as the natural successor to Mr Johnson, with activists forming huge queues to squeeze into the hall. 

However, he paid a fulsome tribute to the PM saying it was down to him that the Tories were in power with an 80-strong majority. 

He also set out his own vision on what the party should stand for, arguing that it must abandon ‘dogma’ to protect future generations from the impact of the pandemic.  

‘I believe that mindless ideology is dangerous. I’m a pragmatist,’ he said.

‘I care about what works, not about the purity of any dogma.

‘I believe in fiscal responsibility. Just borrowing more money and stacking up bills for future generations to pay is not just economically irresponsible, it is immoral. 

‘Because it’s not the state’s money it’s your money.’

Mr Sunak was introduced by one of the beneficiaries of the KickStart programme to get young people into jobs.

And he insisted that was the kind of initiative that would address the root causes of poor living standards and poverty. 

‘Tackling the cost of living isn’t just a political sound bite, it’s one of the central missions of this Conservative government,’ he said. 

‘Is the answer to their hopes and dreams just to increase their benefits?

‘Is the answer to tell that young family, the economic system is rigged against you, and the only way you stand a chance is to lean ever more on the state?

Mr Sunak said more handouts from the government was the ‘essence of the Labour answer’.

‘I believe that the only sustainable route out of poverty comes from having a good job,’ he said.

‘It’s not just the pounds it puts in your pocket, it’s the sense of worth and self-confidence it gives you.’ 

On the topic of the national insurance hike – which will raise £12billion for the Treasury from April – Mr Sunak said: ‘I’ll tell you what is un-Conservative: unfunded pledges, reckless borrowing and soaring debt.’

He continued: ‘Yes, I want tax cuts. But in order to do that our public finances must be put back on a sustainable footing.’

Mr Sunak said Brexit – ‘despite the challenges’ – meant that in the long term the UK would have ‘agility, flexibility and freedom’ and help create ‘a renewed culture of enterprise’.

In a passing reference to the current crisis facing the Government, he said: ‘Right now we are facing challenges to supply chains, not just here but right around the world and we are determined to tackle them head on.’

Mr Sunak announced new measures to help ensure the UK remains ‘a global leader’ in artificial intelligence (AI), claiming it could be worth around £200 billion a year to the economy if it matched the transformational impact of the steam engine, computers or the internet.

‘And so today I am announcing that we will create 2,000 elite AI scholarships for disadvantaged young people and double the number of Turing AI world-leading research fellows, helping to ensure that the most exciting industries and opportunities are open to all parts of our society.’

In a round of interviews earlier, Mr Sunak was asked repeatedly 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. 

The Chancellor sidestepped as he was grilled about the prospect of increasing the levy local authorities can charge, or allowing them to increase the level without holding a referendum. 

But he also determinedly refused to kill off speculation that the government has pencilled in a tax cut for before the election if the economy recovers.  

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’.

He did not rule out an increase to income tax before the next election – but also refused to rule out a cut if there is enough headroom. 

Mr Sunak 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.’ 

Social care costs are partly met from central government funds, but also from councils – who have warned they require £2.6billion a year just to sustain current levels of social care. 

Ministers are reportedly looking at letting local authorities increase the social care levy above 3 per cent without the need for a local referendum.

An alternative would be a direct cash injection in the spending review later this month.  

Meanwhile, Mr Sunak is committing more than £500million in fresh funding to help people back into work as he seeks to stem the continuing turbulence of the coronavirus pandemic.

He 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. 

Funding for the new jobs package in his conference speech will not be set out until the spending review and Budget later this month. 

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 is likely there will be shortages this Christmas, as the strains of coronavirus are 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.’

Mr Sunak has insisted the Government is ‘throwing the kitchen sink’ at helping people get a new job as he unveiled a £500million package to support furloughed workers. 

The Chancellor said he warned at the start of the coronavirus pandemic that ‘it wasn’t going to be possible for me or quite frankly any chancellor to save every single person’s job’. 

He said the end of the £70billion furlough programme will result in some job losses. 

But he said people should be ‘reassured’ that ministers are doing everything they can to help the unemployed back into work. 

Furlough is credited with saving millions of jobs during the Covid-19 crisis but an estimated one million workers were still on the programme when it finally closed last week, sparking fears of a surge in unemployment.  

In his keynote speech, the Chancellor confirmed new funding to ‘prioritise’ job support for workers coming off furlough.

The £500million extension to the Government’s so-called ‘Plan for Jobs’ will also provide tailored packages for others hit by the pandemic, including the young and workers aged over 50.

The Chancellor’s speech came amid 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 per cent 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’.