What tax cuts can we expect, and will they make it harder for Labour?

Turning the screw: Rishi Sunak and Jeremy Hunt visit a training centre in London on Monday (PA)

Jeremy Hunt and Rishi Sunak have been dropping hints about tax cuts in Wednesday’s autumn statement, and it also seems that there will be some benefits reforms to get people back into the labour market. It’s a sharp change in mood compared to even a few months ago, and ministers hope it may signal a political as well as an economic turning point.

What has changed?

As recently as September, the chancellor warned it would be “virtually impossible” to make tax cuts in the autumn statement. Back then, inflation was still looking a little “sticky”, and thus it was a little more likely that the Bank of England might have to push interest rates even higher. With Britain’s national debt now about the same as the value of the national income over a whole year, higher rates would have further increased the debt interest, leaving less room for tax cuts or spending increases.