(Bloomberg) -- Chancellor of the Exchequer Jeremy Hunt says the UK has no money for tax cuts, but that hasn’t stopped the Cabinet from sketching out relief measures before the next election. 

Prime Minister Rishi Sunak’s top team is angling to spend whatever is possible on tax cuts to give their party a more positive campaign message in a general election that must be held by January 2025. Six members of the Cabinet told Bloomberg during the Conservative Party conference this week that they want to see tax cuts. Five favored reductions in business taxes, with one saying cuts to personal taxes should be prioritized.

The Tories are yearning to repair their reputation for fiscal conservatism after allowing taxes to rise to the highest level since World War II while doling out aid to soften the blow of the pandemic and soaring energy prices. While Sunak, a former chancellor and Goldman Sachs Group banker, is eager to burnish his tax-cutting credentials, he lacks the fiscal power to unveil big giveaways.

“If I was putting on my finance minister hat, my first priority would be business tax cuts,” Hunt told a panel event at the Tory Party conference organized by the Centre for Policy Studies. “In the run up-to an election, I would love to do a tax cut that ordinary people felt.” 

For now, though, Hunt said “we’re not in a position to have that discussion or even have that ‘what if?’ scenario in our minds.”

That hasn’t stopped Hunt’s Cabinet colleagues from playing options out as they privately debate the best way to appeal to voters. Even among those advocating cuts to business taxes, there were nuances on precisely what corporations they’d like to target.

Two Cabinet ministers told Bloomberg they want to see a cut to the corporation tax levied on company profits. The rate was raised to 25% from 19% earlier this year, and former premier Liz Truss is among other Tories calling at conference for it to be reduced. 

While her message was greeted by cheers from grassroots Conservative activists at a rally on Monday, a number of MPs and Cabinet ministers speaking privately, dismissed the idea as unachievable.  

Two more Cabinet ministers said any targeted help should be aimed at smaller businesses by raising the thresholds at which they pay value added tax and providing more tax relief for research and development. Another suggested help should be offered to companies worth between 50 million pounds ($60 million) and 100 million pounds, to help them scale up domestically rather than fleeing to other capital markets such as the US. 

Meanwhile, Cabinet veteran Michael Gove said this week that he favored tax cuts on “work,” rather than on inheritance, in order to “incentivize people to work harder.” That comes after Bloomberg reported earlier this year that Sunak was considering cutting inheritance tax, which impacts a relatively small number of higher-value estates, but is seen by some Tories as a tax which stifles aspiration. 

Hunt’s fiscal headroom at his last budget in March was £6.5 billion, the lowest level ever. It’s projected by by Bloomberg Economics to rise to £10 billion in the fall. But he is unlikely to want to spend it, especially as every previous chancellor has kept a larger buffer for emergencies.

In the absence of reductions to headline tax rates, Hunt and Sunak have spent the conference emphasizing their priority is to bear down on inflation, with the prime minister calling that the biggest tax cut he can give ordinary Britons. 

Sunak has told voters to judge him on five key pledges, with the most important one being a promise to halve inflation this year from 10.5% last December.

With Hunt and Sunak saying there’s no headroom for tax cuts — and moreover that any would risk stoking inflation, the chancellor is expected to use his fiscal statement next month to make cuts to the welfare state and big construction projects to provide space for tax incentives at next year’s budget in the spring.

“We should stop debating whether or not we want tax cuts,” Hunt said. “The debate we should be having is how you get tax cuts. Every good Conservative knows there is no shortcut.”

--With assistance from Joe Mayes, Philip Aldrick, Andrew Atkinson and Stuart Biggs.

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