I’m not convinced we need these big tax hikes, Chancellor – and here’s why


These are worrying economic times.

Interest rates – and the cost of our mortgages – are skyrocketing, we predict we will be heading into the longest recession in 100 years and unemployment is expected to rise further.

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Treasury insiders happily advise we need to raise taxesCredit: AFP

Our Chancellor, Jeremy Hunt, has the unenviable task of trying to start fixing our finances in his highly anticipated November 17 budget (or fiscal event, as the government calls it).

We have heard many grim briefings about a terrifying £50billion black hole in our finances.

Treasury insiders have gleefully advised that we need to raise taxes to sky-high levels AND slash tens of billions of pounds in public spending to make the sums add up.

But I urge caution with regard to this plan of tax increases.

I’m not sure we need it. And I’ll tell you why.

First of all, there is no need to panic, the UK has held up well against EU countries, growing faster than Germany and others.

The problem is that much of the pessimism stems from forecasts, which mostly turn out to be wrong.

The margin of error with which the chancellor can make his decisions can be very wide.

TIGHTEN AND SAVE

It is simply anti-conservative at this stage of the economic cycle to increase levies on struggling Brits even further.

Taxes are already at their highest level in 70 years, and as we head into recession, many families simply cannot afford to pay.

I see it in my local constituency of Chingford and Woodford Green.

Families are already cutting back on their weekly groceries — carefully putting off that packet of cookies or carton of juice because it’s just too expensive, or having to save and save to pay for their kids’ school uniforms.

Worse still, the Bank of England report predicting that we are heading into the longest recession in a century did not even factor in the possibility of taxes rising again.

I fear their grim prediction will be even worse if taxes are now raised.

If we raise taxes further, we are likely to make the recession even deeper and more painful.

It’s not a risk we should take.

Prime Minister Rishi Sunak faces tough global economic issues

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Prime Minister Rishi Sunak faces tough global economic issuesCredit: PA

It is a fundamental principle of the Conservative Party to keep taxes as low as possible.

It doesn’t mean cutting them off when we can’t afford it.

But we must beware of giving the impression that we are the same as the Labor Party – always seeking to raise taxes when the going gets tough – destroying the economy.

Eventually, the tax burden should decrease. If we increase it again in this budget, it will be impossible to reduce it by the next election, which should take place in 2024.

All rich nations are grappling with the same economic storm – we have to blame the diabolical invasion of Ukraine by Covid and Vladimir Putin.

Yet we seem to be the only ones raising interest rates and taxes at the same time.

In fact, a recent Treasury chief even spelled out the danger of tax hikes now.

Nick Macpherson said: ‘There is also a need to have a tax and regulatory system that encourages enterprise.

There’s another reason why we shouldn’t be rushing for tax hikes – the dreaded £50billion fiscal black hole everyone is talking about may not be that big or even does not exist after all.

The cost-of-living support scheme – once projected to cost £150billion – is rapidly shrinking.

Take the cost of living bailout that capped average household energy prices to help people cope with soaring gas and electric bills, announced by Liz Truss in September.

It shouldn’t be as expensive as once feared.

Average gasoline prices fell 60% at the end of October.

The price per megawatt hour of gas is well below £90, down from around £300 in August.

Anyone can see that the cost of a tank of gas has dropped from the crippling spikes we’ve seen this summer.

This means the Cost of Living Support Scheme – once expected to cost £150billion – is rapidly shrinking.

This will help the Chancellor massively.

Many of Britain’s economic problems are global.

Endless Covid lockdowns have caused crucial supply chains to collapse and the global economy has struggled to rebound from the pandemic.

This was already fueling inflation.

STUTTER ECONOMY

Then another disaster struck in February, when the megalomaniac dictator Putin sent his army across the border to invade Ukraine.

The West – rightly – retaliated by imposing sanctions and closing access to Russian oil and gas.

It was the right thing to do. But it has also fueled inflation – particularly in energy prices, but also in food.

Rishi Sunak and his chancellor are absolutely right in trying to reassure the markets that they will seize our faltering economy.

But as they go through the spreadsheets and approve decisions, a word of warning – be careful not to raise taxes.

Voters may not forgive us.

What we need as soon as possible is growth.

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Above all, the UK economy relies on small businesses for growth and job creation.

They need their tax cuts if we want to ensure growth and avoid a terribly deep recession.

Conservatives should resist tax hikes, says former leader Iain Duncan Smith

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Conservatives should resist tax hikes, says former leader Iain Duncan SmithCredit: Alamy
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