UK Treasury chief: Tax cuts must wait for inflation to fall

LONDON (AP) — Britain’s Treasury chief said Friday that taming inflation is more important than cutting taxes, resisting calls from some in the governing Conservative Party for immediate tax breaks for businesses and voters.

At a speech in London, Chancellor of the Exchequer Jeremy Hunt said “the best tax cut right now is a cut in inflation.”

The U.K.’s annual inflation rate hit a four-decade high of 11.1% in October, fueling a cost-of-living crisis and a wave of strikes by workers seeking pay raises to keep pace with rising food and energy prices. It has since eased but still reached a painful 10.5% in December and is the highest since the 1980s.

Prime Minister Rishi Sunak has promised to halve the inflation rate from those levels by the end of the year.

Hunt said he wanted Britain to be a low-tax economy but “with volatile markets and high inflation, sound money must come first” — a sign he won’t cut taxes when he makes his annual budget statement in March.

The U.K. economy, like others around the world, has been rattled by pandemic restrictions and the shockwaves from Russia’s invasion of Ukraine. Britain also has suffered the self-inflicted damage of Liz Truss’ brief term as prime minister last year. She resigned in October after her plan for billions in unfunded tax cuts spooked financial markets, drove up the cost of borrowing and sent the pound plunging to a record low against the dollar.

Hunt was appointed to steady the economy in the final days of Truss’ seven-week tenure and was kept on by her successor, Sunak.

Inflation is higher than in the U.S. and the 20 nations that use the euro currency, with most forecasters expecting the U.K. economy to contract in the first half of 2023.

In his speech at the headquarters of news agency Bloomberg, Hunt argued that...