What should Jeremy Hunt do in his budget? Watch the tough debate about raising taxes in the face of a recession
In this Strictly Business video debate, the Daily Mail’s Ruth Sunderland and Alex Brummer discuss what the chancellor should do in his fall statement.
It may be called the Autumn Manifesto, but Chancellor Jeremy Hunt’s first mini budget, due to be delivered on Thursday, will be the most austere since George Osborne’s fiscal package in the aftermath of the 2010 financial crisis.
All initial indications are that Hunt, backed by Prime Minister Rishi Sunak, will seek to close an alleged ‘black hole’ of up to £55bn in public finances, in every financial year to 2027-28.
He will do so by introducing large tax increases and cutting public spending.
It would be a terrible missed opportunity if capital investment in large projects such as the new nuclear power at Sizewell in Suffolk and high-speed rail projects were to be cut back, as they are essential to energy security and to raise Britain’s lamentable productivity.
Settlement Minister Michael Gove has already indicated that tax-advantaged, low-regulation investment zones – as proposed by former prime minister Les Truss – are on their way to being chopped up.
The deterioration in public finances is attributed to the high bill of interest rates on government borrowing, higher-than-expected inflation, and deteriorating economic conditions. Slowing production means that tax receipts for consumers and businesses will fall below previous targets.
The bigger concern is that in efforts to consign a “mini budget” of failed tax cuts from Les Truss and Kwasi Quarting to the dustbin of history, Hunt will go too far and squeeze any life out of the economy.
The chancellor has already indicated that it would reverse a proposed cut in corporate tax from 25 percent to 19 percent due to begin in 2023 that was at the heart of the Quarting budget.
Among the main tools Hunt is expected to use is an extension of the tax credit freeze. This so-called stealth tax pushed millions of people into high tax brackets and raised as much as £40 billion.
The move has been criticized by the Independent Institute for Fiscal Studies as unfair and penalizing the companies.
There have even been suggestions that the chancellor could raise the top income tax rate from 45 percent to 50 percent. His short-lived predecessor Kwasi Quarting had proposed cutting the top rate to 40 per cent, prompting accusations from the opposition benches of tax cuts for billionaires.
The truth is that such a move would be hugely discouraging to executives, with the choice to work abroad, to go elsewhere.
Amid the slowdown in the global economy, Britain is the only rich country from the Group of Seven countries that imposes strict fiscal constraints at this time. Raising interest rates and tightening budget policy at the same time will hurt the expansion of the British economy, institutions and efforts to tip it over with a sledgehammer.
Strictly Business: Watch the debate
