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The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.
The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.
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Pre-Budget Suggestions - No Tax Rises!

Rishi-Sunak

As the Chancellor prepares to deliver his Budget, we want to make clear a few brief advisories to Mr Sunak on what this historical Budget should contain.


First of all, there has been plenty of speculation from countless newspapers and TV reports that the Chancellor is plotting tax increases, namely corporation tax and potentially freezing tax bands. This, in our opinion, would be absolutely disastrous, especially as we exit the pandemic period and prepare for a proper recovery as well as embracing the benefits of Brexit.


To raise taxes, especially at a time when the economy is already stagnating and even shrinking, would be ludicrous and quite frankly, fundamentally un-conservative of Rishi Sunak. As far as I can remember, the Conservative Party has been the Party of low taxes and cutting taxes to stimulate growth, however recently we have seen the Shadow Chancellor Anneliese Dodds argue against tax increases! I hate to say it but she is right, I joined the Conservative Party and I represent the Conservative Party as a believer in low taxation and economic growth, but most of all because this is the Party of business.


There seems to be a global consensus on NOT raising taxes and should the Chancellor elect to do so, we run the risk of being left behind by not only the west but also developing nations who we may be competing with for investment. Labour have said 'now isn't the right time for tax rises', we will go one further and say, 'there is never a good time for tax rises'! 


Rishi Sunak said on the Andrew Marr Show last weekend that he was, "a believer in low taxes", yet the speculation suggests very strongly that he is in fact going to freeze tax bands, which in our opinion would be a grave error. Senior Conservatives are unhappy with the rumours so far and rightly so, we should be cutting taxes for the people hit worst by the pandemic and lockdown.


Sir John Redwood has correctly outlined how by cutting taxes, we stimulate economic growth and give the economy a much needed tonic, which will, in the long term, help with cutting the deficit. We need to be promoting recovery, not more doom and gloom which we've seen far too much of this last year. Even the usually pessimistic OBR Report has suggested better forecasting than expected for this year, which is surely some optimism the Chancellor can insert into his statement to the House.

As outlined in my interview with Ben Habib, the debt racked up in 2020 has been monetised by the Bank of England, therefore writing it off to some extent, however, as we also discussed, this cannot be a long-term plan. Quantitative easing is a short term solution and can either make or break a government but due to the current global climate, we appear to have got away with it, mainly due to the level of borrowing which has been sanctioned by the treasuries and governments in the Eurozone, the USA and Japan. The money which has been released through the programme of QE has been wisely spent by the Chancellor in his package of support, for example the furlough scheme, but again, I would like to point out that it cannot continue much longer, that is in reference to the endless borrowing and monetisation of government debt.


We believe cutting taxes in this Budget would be beneficial to all people and businesses, some of the poorest people in Britain have been hit hard by this pandemic, some haven't been able to stay off work and furlough for some of the worst off households just hasn't been enough, therefore, we need to be cutting taxes to stimulate consumption. By doing so, the laws of basic economics and lessons from the past teach us that if you increase consumption then the economy will boom, or in this case, turbocharge the recovery.


Businesses in this country have been harpooned by lockdown and we need to be supporting the backbone of our economy, we need to be spending in those shops, restaurants, pubs and various other establishments which keep us going. As I have quoted many times before, Napoleon called us "a nation of shopkeepers", he meant that as an insult but we take it as a compliment, now we want to urge the Chancellor to provide the direct and indirect support these people need.


We would like to encourage the Chancellor to cut income tax which will help supercharge growth and increase consumption which is much needed; we would like to ask Mr Sunak to consider cutting VAT in the hospitality sector, and possibly bring back the Eat Out to Help Out scheme to help boost the industry which has been laid to wait for far too long now. Easter should be the marker for when everything reopens, our world beating vaccination programme should signal to Boris Johnson that we should be speeding up the roadmap out of lockdown. After all, the Prime Minister is a big fan of wind, so why doesn't he throw caution to it?!


The big problem for us is the proposal to raise corporation tax from 19pc to 25pc by the end of this Parliament, that would be unmeasurably stifling to businesses but more so, consumers for after all, taxes like that are 9 times out of 10, passed onto us as consumers. It is a tax which affects profits, however due to lockdown, very few firms are actually making profits and now there's absolutely no incentive to do so, furthermore, it is a massive put off for potential new investors in the UK post-Brexit.


We would also like to point out that Ireland, with a business tax rate of just 12.5pc, collects greater receipts in proportion to its economy than we do with a higher tax rate, currently sitting at 19pc. Sometimes by cutting taxes, it creates more investment and more incentives to do better and go that further step and therefore raising greater receipts.


The last thing the UK needs now is tax rises or stealth taxes, we need to be hitting full throttle on promoting the UK on a global stage, promoting British businesses, every policy should be geared to a full economic recovery and prosperity. We need the full energy of the self-employed and small businesses to accelerate our pandemic recovery. We need to crucially start unlocking and give the support to those industries that need it most such as retail, hospitality and leisure, the Chancellor could therefore potentially look into a reverse furlough scheme where the government contributes to salaries of employees providing they are going back to work which will help businesses on their way back to normality.


We would also like to see a comprehensive plan for our younger generation, to ensure that they won't be footing the bill of lockdown through endless tax increases, that the debt racked up which has not been monetised, should be offset as a form of wartime debt, paid off over several decades. We would also like to see Chancellor Sunak implement funding to help with young people to get onto the housing ladder, as this is becoming more than a crisis, this is becoming generation rent due to the shortage in supply of housing and should be taking into consideration renting history when mortgages are being agreed. However, that is something to discuss on another day completely!



References:

https://www.bbc.co.uk/iplayer/episode/m000stx3/the-andrew-marr-show-28022021

https://www.telegraph.co.uk/politics/2021/02/28/rishi-sunak-paves-way-tax-rises-warning-enormous-toll-pandemic/

https://www.telegraph.co.uk/business/2021/02/28/economic-growth-miss-predictions-budget-looms/ 

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