Boris Johnson has indicated his government will not cut taxes until inflation is under control, as he came under fresh pressure to slash the amounts paid by households and businesses.
The prime minister insisted he was cutting taxes “as fast as we can” after Gerard Lyons, who advised him when he was mayor of London, called for reductions in income and corporation tax.
Mr Lyons suggested the latest figures showing a decline in the UK economy highlight the need for a tax-cutting stimulus.
The Office for National Statistics (ONS) said gross domestic product (GDP), a measure of the size of the economy, fell by 0.3 per cent in April, following on from a 0.1 per cent fall in March.
Mr Lyons, who was picked by Mr Johnson as his chief economic adviser in City Hall, said: “The economy is losing momentum. It is not just a cost-of-living crisis but a weakening growth picture that policymakers have to contend with.
“Given this economic backdrop, while the direction for monetary policy is tighter, the speed, scale and sequencing of this tightening needs to be sensitive to economic conditions. The slowing economy justifies fiscal easing and the argument in favour of appropriate tax cuts.”
Mr Johnson told LBC Radio: “We want to make sure that we do everything we can to reduce the burden of taxation.”
The prime minister pointed to changes to national insurance thresholds in July, the 5p cut in fuel duty and £150 council tax rebate as ways the government is cutting taxes.
Mr Johnson added: “He will understand that we are bringing in tax cuts as fast as we can but what we have also got to do is look after people in a tough time.”
The country has been hit by an inflationary spike, Mr Johnson said, and “the thing that needs doing at the moment is looking after people who are facing increases in the cost of living”.
Expanding on Mr Johnson’s comments, a senior government source told The Telegraph: “The more you spend, inflation spirals. We’ve got to be responsible. We can’t do anything that inflames that further.”