Dare to be a Conservative, Jeremy Hunt
The Chancellor must make a start on cutting taxes and curbing spending in this week’s Autumn Statement.
Record taxes, higher spending and mass state subsidies are not usually the hallmarks of a Conservative government. In this week’s Autumn Statement the Chancellor must be bold.
Our country needs the growth that a pro-enterprise tax-cutting agenda will deliver. Our party must differentiate itself from the high-tax, high-spend approach of Labour. The Chancellor has the scope to act.
Inflation is falling and that is welcome news. But it should not be confused with a tax cut. We cannot just rely on lower inflation rates to support the economy. Prices are still rising and households continue to feel the pinch.
The Chancellor must follow in the proud tradition of past Conservative chancellors by delivering an ambitious programme of measures to ease the tax burden. Having served in government as a Treasury minister, I know that the Chancellor will be feeling pressure to maintain high levels of spending and the tax receipts to fund this. But there are taxes he can cut to support business, and costs he and ministers across the Government can reduce.
The five pence cut in fuel duty introduced in 2022 has been a huge help to businesses and families, keeping costs down and helping to lower inflation. The Chancellor must keep that reduction in place and look to cut fuel duty further. Conservatives have a strong record on freezing and cutting fuel duty since 2010, which would have doubled under the plans inherited from Labour. He should also give our high streets a boost by freezing business rates.
Britain must be open for businesses and remain competitive to attract inward foreign investment to help create new jobs and better-paid employment. Our mission post-Brexit must be to become a beacon of global free trade. The corporation tax hike put in place last year risks holding investment back, so the Chancellor should return to the lower rate and look to reduce it further over the medium term.
Being open for business also means cementing Britain’s status as a tourism superpower. But the tourism tax has left us uncompetitive as our European rivals benefit from offering VAT-free shopping to visitors, something we scrapped in 2020. Some estimates show that if the Chancellor abolished the tourism tax we could add £10 billion to our economy.
With wages rising, people are paying more in income tax as the tax-free allowance threshold and the higher rate threshold have been frozen and are due to remain unchanged until 2028. That means that three million more of the lowest earners could be dragged into paying income tax over the next few years, which I believe is unfair. Increasing the threshold by inflation or £1,000 will help those on the lowest incomes.
For the higher rate, the Chancellor must put in place a strategic plan to raise the threshold so fewer people are caught handing 40 per cent of their earnings over to the taxman. Thirty years ago, just one in 14 earners paid the higher rate. Now one in six does, and by 2028 it will be one in five.
The Chancellor can also help families by cutting inheritance tax, and by freezing or cutting alcohol duties, air passenger duty and green taxes.
These modest changes in tax rates will help families with the costs of living and support economic growth. Alongside reducing the tax burden, the Chancellor must announce measures to contain and limit public spending.
With the pandemic and costs of living pressures leading to significant levels of state intervention and spending, the Government must get a tight grip on its own expenditure. Public spending is approaching £1.2 trillion, nearly 30 per cent more than planned just before the pandemic.
All that spending needs to be paid for by current and future taxpayers. This is why the Chancellor must announce public sector reforms to improve efficiency and save money. A total of £4 billion in efficiencies was saved by the Government in 2021/22, but that’s only about £1 out of every £250 spent. Every pound saved from bureaucracy, administration and waste can be reinvested in front-line services or used to keep taxes down.
As Conservatives, it is our purpose to empower families and businesses by delivering tax cuts, economic freedoms and efficient public services. So our budgets and fiscal statements must stay true to those values. People, not the state, know best how to spend the money they earn. That’s what makes us different from the tax-grabbing Labour Party.
An Autumn Statement this week that embraces Conservative values will give voters a clear choice at the next general election between high-tax high-spend Labour, or the low-tax economic freedoms offered by the Conservatives.