Sorry, no tax cuts for you | The big announcement from the CBI conference was that Johnson was delaying a promised cut to corporation tax, to fund an extra £6 billion for the NHS. That means
it joins a growing list of promised tax cuts that the Tories are shelving, including raising the thresholds for the higher rate of income tax, inheritance tax and national insurance.
It’s also rather awkward for the PM. As recently as this summer’s leadership election he was trumpeting the usual Conservative lines about the Laffer curve and how cutting corporation tax leads to a higher tax take. That curve does, however, reach a point where cuts are counter-productive. Does the PM think he’s found that point?
You've got to pay for it somehow | Perhaps. The move is a reflection of the Government’s deep unwillingness to raise personal taxation rates – a phobia shared by Labour, who insist that only the wealthiest in society will face tax rises under a Corbyn government – and the need to retain at least some vestiges of the party’s reputation for fiscal prudence.
Compare that with the Lib Dems who have recommitted to their 2017 policy of
adding 1p to every income tax band to fund the NHS by an extra £17 billion a year.
Politically, the Tories have always fared badly when linked to personal tax rises. Yet the public mood is supposedly shifting. According
to pollsters,
even Tory voters now favour tax rises to pay for extra spending, although how many think those tax rises will hit their own pocket is unclear.
European spending, American taxes | Politics aside, what about the policy? Ultimately, the UK needs to make its mind up about what kind of country it wants to be. Britain has many of the services and the expectations of those services of a high tax economy, but without the levels of personal taxation that usually accompany such provisions.
While the tax burden in the UK, at around 35 per cent of GDP, is at its highest rate in decades, it’s still below the rate of other large European economies and well below that of other wealthy European countries. (Germany and Austria are at 45 and 48 per cent respectively, while the Nordic countries and France are around 50 per cent or more.)
There may well be room in the economy for higher personal taxation to fund greater public spending – if that's what voters really want. Yet neither of the big parties is proposing that.
The Tories want to spend billions more without generating a higher tax take, which can only mean more borrowing. Labour insists that only the richest need pay more, which is entirely unrealistic. The wealthiest in Britain already
provide a record proportion of the country’s tax take, and it’s unlikely to be prudent to narrow the country’s tax base any further.
Public opinion may have swung decisively against austerity, but no one is yet willing to explain the cost of abandoning it.
He's safe, the rest of you though... | Why are the Tories sticking to fiscal prudence at all? That’s thanks to Sajid Javid, the Chancellor, winning a significant fight in Downing Street over the party’s policies. He was backed up by Isaac Levido, the Tory campaign chief, who insisted the Conservative’s reputation for fiscal responsibility was a key differentiator from Labour.
Yet the victory led to speculation that Javid might be for the chop after the election.
Instead, Johnson assured the CBI yesterday that he would not sack his Chancellor in December. The PM did, however, insist that he wouldn’t guarantee any other Cabinet ministers their jobs. That, unsurprisingly, has led to speculation over who might be for the chop. Jacob Rees-Mogg, who is in enforced hiding after his Grenfell comments, is high on betting slips.
