The next Chancellor could spark an economic revolution with a radical, tax-cutting budget

Published: 22nd July 2019 - 9:11 am Category: National News

Publication: Daily Telegraph
By: Priti Patel
Date: 21st July 2019

Revolutions about taxation have shaped our history. Magna Carta and the Civil War were about the power to tax. The American Revolution was sparked by a series of taxes and tariffs on tea. More recently, the Thatcher and Reagan “revolutions” were rooted in overturning the status quo – excessive taxation – to empower the individual and encourage a free society and prosperous economy.

The establishment of a new government this week presents a once in a generation opportunity to inject a wave of new ideas and a renewed sense of optimism. After years of economic pessimism anchored in post-crisis low growth rates, the next government must embrace a radial liberalising programme.

Over the last 25 years politicians have chosen to ignore the steady growth in the tax burden, which has reached crisis levels as across the country people and business are working harder than before but keeping less of what they earn.

‘Tax Freedom Day’ – an informal measure of how long into a calendar year we pay taxes before we start keeping our own money – is happening later each year. In 2018 Tax Freedom Day fell on 29 May as Britons worked 148 days in the year to pay taxes. This is the latest it has been since 1995. So within the space of a quarter of a century we are working almost a month longer before we can start keeping the money we earn. Although the visible tax we pay through PAYE has fallen as the personal tax free allowance has risen, other taxes have increased and new taxes have been created.

Excessive taxation has serious consequences for our economy and our politics. It is felt in the pockets of families and tills of businesses up and down the country. For those who are struggling to cope with rising housing costs, the lack of disposable income to spend as they need and choose has a profound effect. For businesses the impact of taxation means less investment and lower job creation. And as for the politicians, well too many are blind to the some of the underlying truths of economics and human behaviour. They remain wedded to static models which predict that higher tax rates will automatically bring higher revenue.

When Margaret Thatcher took office she recognised the threats to our country caused by an excessive tax burden, and brought in economic reforms which meant the tax burden fell progressively throughout the 1980s and into the mid-1990s. Tax receipts which stood at over 40% of GDP fell to under 32% . But all that hard work, which restored Britain’s global standing as a competitive high-performing economy and gave families new opportunities to save and own property, has been fatally undermined by successive governments.

As I argue in my report published by the Centre for Policy Studies, Changing Gear: A Growth Budget to Drive the UK Economy, Britain needs to jump-start growth. For too long, our nation has relied on low interest rates rather than undertaking the necessary long term necessary economic reforms. The report highlights what can be done to strengthen the base of the UK economy to build a future for long term growth. This means implementing reforms to release private sector growth, reducing harmful and counterproductive taxes, revitalising public sector productivity, and taking a fresh approach to normalise interest rates over the medium term.

The politics of economic growth must take centre stage in a renewed Conservative Government. There is a clear need for a radical and pro-growth Budget this Autumn, and this report shows makes the case for serious change and a new economic vision that builds upon stabilisation of the economy post 2010 without accepting the creeping economic stagnation that has taken root.

The outgoing government failed to grasp the basic facts, that this country is sleeping walking toward economic stagnation as taxes drift higher and higher, along with the costs of complying with this labyrinthine system of taxation.

The incoming government must break away from the flawed orthodoxies which have dominated economic thinking for decades. A new government ambitious for the future of our country should embrace this liberalising approach to rejuvenate the economy, and give Britain the fresh start it sorely needs.

Priti Patel is the MP for Witham

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