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Emily Carver is a broadcaster and commentator.
Sir Keir Starmer has come out this week with his plan to “secure the highest sustained growth in the G7”.
As one might expect, the plan is full of meaningless jargon, from “catalytic public investment” to “building the economy from the bottom up and middle down”.
Indeed, their latest proposal, which sounds like its been copy and pasted from a TUC press release, is to require all companies with over 250 employees to publish an annual “menopause action plan”.
Nonetheless, the public are seemingly on board, with polling showing voters trust Starmer more than the Rishi Sunak when it comes to the economy.
It doesn’t hurt either that the Labour press office is working overtime to talk down the UK every day; the latest attack line being that if Britain stays on its current economic trajectory we will be “poorer per head than Poland” by 2030.
Whether this is true or not, I do not know. But Jeremy Hunt’s intransigence when it comes to tax is certainly not helping us exceed expectations.
Luckily in two weeks’ time he has an opportunity to turn things around, boost confidence in the British economy and restore trust in the Government’s handling of the economy. To do so, his red box needs to pack a punch; avoiding making our tax regime even more burdensome would be a good start.
Yesterday, the Prime Minister called Northern Ireland the “world’s most exciting economic zone”. It seems unfathomable, then, that he would allow his Chancellor to hike corporation tax from 19 per cent to 25 per cent, and remove investment incentives in the form of the super deduction, while south of the border the tax rate stands at just 12.5 per cent.
Frustratingly, Hunt knows well that hiking corporation tax is no long-term solution to balancing the books: why else pledge to reduce the rate to a competitive 15 per cent during the Tory leadership race?
Yet both continue to insist that this is the way to bring down government debt. They persist despite countless warnings from the likes of the National Institute of Economic and Social Research (who say we could lose £150 billion in business investment over the next five years), and analysis from the CBI that shows our tax regime will become far less attractive if they forge ahead with their plans.
So, while Labour manages to convince the public they would be competent at running the economy, the UK faces the prospect, under a Conservative government, of falling from fifth to 30th place in the OECD table on tax competitiveness.
It doesn’t take a genius to work out that is neither a recipe for sound finances nor economic growth.
At the same time, according to the Heritage Index, the UK is falling down the league tables when it comes to economic freedom, plummeting to our lowest rating since 1995 – in no small part thanks to ever-growing tax burden.
Now, the Chancellor has three economic aims, as outlined by the Prime Minister: halving inflation, growing the economy, and getting debt falling. Currently, it appears his attention is very much focused on the first and the last. But need it be?
Taxing people more may indeed deliver a windfall; much has been made in the press this week about a potential £56 billion budget boost Hunt may have due to the sharp fall in energy prices and more “tax-rich” growth.
Against a backdrop of demands for higher public sector pay and tax cuts, it is likely that he will double down and insist this is a sign of his plan to get debt working and should not be used fund permanent spending increases, or tax cuts.
He is correct, of course, to point out that this sum isn’t ‘extra’ money; it just means we may need to borrow less than expected this year and next.
But the Chancellor desperately needs to balance his fiscal prudence with his promise to grow the economy. Growing the economy is what will get debt down over the medium to long term; saddling people with ever higher taxes and hoping they and businesses don’t change their behaviour will not.
And, contrary to his assertion that tax cuts would be inflationary, they could also reduce the impact of inflation and boost our economic performance.
Labour are positioning themselves as a pro-business party. The polling shows their strategy is working. But there is still time before the next election to show the Conservatives know how to create the right conditions for business to flourish.
History tells us that a country falling in terms of economic freedom and tax competitiveness is one destined for stagnation. Sunak has pulled a rabbit out of the hat this week with his Brexit deal; let’s hope in two week’s time Hunt does the same – in the form of a competitive tax regime.