(Bloomberg) -- Jeremy Hunt said he has no leeway to cut UK taxes at present, putting the Chancellor of the Exchequer on a collision course with Conservative colleagues who want to see tax cuts to boost their party’s electoral prospects.

In a Bloomberg TV interview, Hunt warned that lowering taxes now would stoke inflation, which would hit the finances of ordinary Britons. He also said that the UK doesn’t have the fiscal power to fund such a move.

“We don’t have that headroom,” Hunt told Bloomberg in Manchester, where he will address the Tory Party conference later on Monday. “There’s another reason why this isn’t the right time for big tax cuts which is even more significant, which is they’d be inflationary.”

Hunt is having to face down growing discontent within the governing Conservatives over Britain’s tax burden, which has risen to its highest since World War II. Senior figures including cabinet minister Michael Gove and former premier Liz Truss are calling for taxation to be reduced ahead of a general election expected next year. 

Hunt and Prime Minister Rishi Sunak have both talked down the prospect of cutting taxes at the Autumn Statement in November, saying their priority is to curb rising prices.

In a round of broadcast interviews on Monday, Hunt also:

  • Told Bloomberg he wants more pension pots to invest in start-ups and tech firms
  • Said on the BBC that a marked rise in debt interest payments has hurt his ability to cut tax
  • Ducked questions on the future of the HS2 high speed rail project, saying only it was right to query its cost
  • Told Times Radio he’s “completely cured” of any desire to run to be Tory leader

Instead of tax cuts, Hunt will announce Monday a hike in the national living wage to at least £11 ($13.42) an hour from £10.42. That will boost earnings for about 1.7 million people from April when it takes effect. 

Read More: Sunak Faces Tax-Cut Row as Conference Gets Underway: Tory Latest

Hunt will also say that he plans to review the sanctions regime for welfare claimants as he tries to encourage more people to return to work. Bloomberg reported last month that Hunt is considering cutting benefits in real terms at the Autumn Statement to help the public finances and further push people to re-enter the labor market.

“We’re a government that wants to make work pay,” Hunt said on Bloomberg TV. “It’s part of a bigger strategy.”

The Tories are trying to close a double-digit polling gap behind the main opposition Labour Party but are divided on the best approach to the economy. There’s a clamor of voices on the party’s right calling for tax cuts, after they rose to their highest level in decades to pay for pandemic-era spending and energy support programs following Russia’s war in Ukraine.

Before Hunt speaks, Truss is due to address a fringe event at the conference, dubbed the Great British Growth Rally. She will call for cuts to corporation tax and a boost to housebuilding, according to excerpts of her remarks sent by her office. Meanwhile Gove said on Sunday that he’d favor reducing levies on working people. Former Home Secretary Priti Patel has also weighed in, calling the tax burden “unsustainable.”

Asked about taxes on Sunday, Sunak said he wanted to reduce them but he is currently focused on tackling high inflation — which he has pledged to cut in half this year. Inflation stood at 10.5% last December and has since come down to 6.7%.

“The best tax cuts that I can deliver to the British people right now is to halve inflation,” Sunak said on the BBC. “It’s a tax that impacts the poorest people the most.”

--With assistance from Kitty Donaldson.

(Updates with more details from first paragraph.)

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