Rishi Sunak has suggested only “idiots” would not understand the factors meaning he cannot deliver the immediate tax cuts some Conservatives desire.
The Prime Minister insisted he does want to reduce taxation but argued the coronavirus pandemic and Russia’s war in Ukraine mean he cannot do so yet.
“You’re not idiots, you know what’s happened,” he told an audience in Morecambe, Lancashire, on Thursday.
His comments came during the week that Tory MPs aligned with former prime minister Liz Truss’s tax-cutting agenda met for the first time as part of the “Conservative Growth Group”.
Billionaire businessman Sir James Dyson has also criticised the Government’s “short-sighted” and “stupid” approach to the economy.
Mr Sunak defended his policies during a discussion with voters he has dubbed “PM Connect”, as he seeks to turn around the Conservatives’ dire polling.
In a jibe at Boris Johnson, the Prime Minister said: “When I was Chancellor I also really preferred it when the Prime Minister didn’t comment on tax policy.
“I’m a Conservative, I want to cut your taxes… I wish I could do that tomorrow quite frankly but the reason we can’t is because of all the reasons you know.
“You’re not idiots, you know what’s happened.
“We had a massive pandemic for two years, we had to shut the country down, do a bunch of extraordinary things that didn’t come cheap. Now we’ve got this war going on which is having an enormous impact on inflation and interest rates.”
Mr Sunak said it “takes a bit of work” to get the state of the public finances “where it needs to be”.
But he vowed to strengthen the economy, secure lower interest rates and get a “grip of” soaring inflation.
“Trust me that’s what I’m going to do for you this year, that’s what we’re going to do while I’m Prime Minister and if we do those things we will be able to cut your taxes,” he added.
In Friday’s Daily Mail, former Tory leader Sir Iain Duncan Smith argued the country is “already over-taxed and it is quite clear we cannot tax ourselves out of a recession”.
Conservative backbencher Sir John Redwood added: “We cannot address the issue of growth without some tax cuts. They must be affordable, of course – but the best way to bring borrowing down and boost revenues is to grow the economy.”
Chancellor Jeremy Hunt is planning to unveil a spring budget in March but immediate tax cuts are thought unlikely as the Government tries to tackle inflation.
Sir James, the founder and chief engineer of Singapore-based multinational technology company Dyson, has urged the Government to use the budget to “incentivise private innovation and demonstrate its ambition for growth”.
Writing in the Telegraph, he argued ministers seem intent on imposing “tax upon tax on companies in the belief that penalising the private sector is a free win at the ballot box”.
“This is as short-sighted as it is stupid. In the global economy, companies will simply choose to transfer jobs and invest elsewhere,” he said.
“Our country has an illustrious history of enterprise and innovation, born of a culture which we are in the process of extinguishing. We have got through the worst of Covid but risk wasting the recovery.”
While visiting the North to promote his £2.1 billion levelling-up spending, Mr Sunak defended his strategy when asked about Sir James’s comments.
“Of course growing the economy is really important. But what does it actually mean in practice… it means more jobs that pay well,” he said.
“That is the simplest way for everyone here to think about it.”
Mr Sunak highlighted the “very generous” annual investment allowance, adding: “A million quids’ worth of investment you can write off against your tax bill. No other country in the world does something like that.
“I’m very happy for James Dyson to tell me if I’m wrong, but virtually no other country in the world that I know does anything like that for small and medium-sized businesses.”
Asked whether Mr Sunak viewed people who wanted tax cuts as “idiots”, a Downing Street spokesman said: “He didn’t call anybody an idiot and he himself set out his ambitions to reduce the tax burden over time.
“He said that the worst thing he could do is make promises he can’t keep and saddle a country with more debt.
“And he set out once again that his overall ambition is to reduce tax. But that needs to be when we have when we have economic stability and inflation’s come down.”