The author is a Conservative MP
Just when this country – emerging from the fog of the pandemic and facing a post-Brexit future – needs growth, it is put in jeopardy by a finance ministry that focuses on tax increases at every turn.
As it turns out, the British people, facing an impending £ 600 increase in their energy bills, are facing the pain of living under a tax burden that will be higher than at any time since the end of World War II.
If the public is to be spared, Rishi Sunak’s finance ministry must shelve its planned tax increases and return to an aggressive pro-growth agenda now.
Unfortunately, we have not seen any indication that we can expect such an approach from this Chancellor. Not only is Sunak happy to raise the tax on the individual through a national insurance increase – theoretically to fund the NHS – he is also enthusiastically raising the corporation tax.
This seems to arise due to a lack of understanding of the impact on individual families of a cost-of-living crisis that is becoming more severe day by day. April is just around the corner, where tax increases will take effect and the energy price ceiling must be revised and raised.
The government is happy to cut “red meat” policies for its backers. But we need the kind of “red meat” that matters – efforts to ease the cost-of-living crisis and keep money in the pockets of hard-working people.
The Ministry of Finance will argue that these increases are necessary to stabilize public finances, but they will do the opposite. Increased taxes on income will only deter wage and job growth and hurt demand.
The government expects £ 12 billion from the health and social security tax announced last September – a completely unrealistic estimate. I would be surprised to see half of that amount raised. But the tax will set in motion the cost-of-living crisis and move the Conservative Party even further away from our hard-fought reputation as the party with low tax and duty liability. We should cancel the NI increase immediately.
In addition, the corporation tax increase will drive inward investment in the arms of our competitors. It must also be canceled. To take advantage of the opportunities we have, we need an economic strategy that fits a post-Covid, post-Brexit UK. It starts with scrapping these damaging tax increases.
The Ministry of Finance is so focused on trying to balance the books that it can not see the dazzling obvious – that the pandemic is an event that happens once a century and the costs must be treated accordingly. The country should treat Covid debt as a war bond, stretched over a period of 50 years or more. Each month’s delay makes this more expensive.
As for the level up, there seems to be a belief that we need to balance cash expenditures so that every penny spent on infrastructure needs to be financed from the current taxation. There is no logic in setting regional policy directly against the demand for a tax reduction. Both are part of an growth agenda.
Her Majesty’s Treasury is seen as the Rolls-Royce of the departments; the main gear in the government machine, well oiled and provides maximum efficiency. But I know from my time as President of the Public Accounts that this is not always true. A decade ago, George Osborne, then chancellor, delivered his “omnishambles” budget, which was almost universally mocked, forcing Osborne to U-turn after U-turn as his caravan tax increase was driven off the road and the doughy tax got cold .
The chancellor rightly had to carry the can. But his department developed, tested, and calculated these policies. Ten years later, can this department, the facilitator of the ERM failure, source apocalyptic and false warnings about the cost of Brexit, have confidence in rebuilding an economy crippled by the pandemic?
Time is running out to drop these tax increases, ease the cost of living and fix the ship. If we do not, the country will face a real crisis: and this time a crisis we have created ourselves.