The whispers going around last year’s party conference largely centred on the state of government – how it was deteriorating so quickly. This year’s whispers are about something that is by no means as dramatic, but possibly as existential to the future of the party: the prospect of tax cuts.
The official line is simple: no tax cuts this year. Chancellor Jeremy Hunt has spent his summer trying to quell expectations that his Autumn Statement next month will include any major changes to the tax burden, which is set to reach a post-war high by the time of the next election. This morning he said now is ‘not the right time’ for tax cuts, though he did say an inheritance tax reduction is in the ‘basket of all tax cuts’ under consideration. The Prime Minister, for his part, continues to insist that he, as a Conservative, would like taxes to be less burdensome. Yet he has pivoted away from making a clear statement about when the government might go about making those changes.
It’s expected that they’ll come in the March Budget next year, not least because the risk of going into a general election without some kind of tax offer seems far too great, especially for the Tory party. But MPs are getting antsy. Asking a minister last night how things are going, his reply was short and sweet: ‘All going well, thanks. If only the tax burden were lower.’ It’s the topic everyone wants to discuss – everywhere but in public. While the buzz from Sunak’s net-zero announcements has created a little more optimism than there might otherwise have been, it has also created a loose playbook for returning to ‘conservative principles’, one which MPs on the right of the party want to see replicated on tax.
Part of the problem is the government’s reason for postponing tax cuts. Speaking to Sky News this morning, Hunt insisted that the tax cuts must wait, not only because of limited fiscal headroom, but because ‘big tax cuts now… would be inflationary’. It’s an argument many people won’t buy: similar to the Bank of England blaming the inflation crisis on lockdowns, Russia’s illegal war and the energy crunch, it suits ministers and central bankers to leave out the biggest factor that was always in their control: the vast money printing experiment they ran during lockdown, leading to the kind of monetary phenomena that tends to explain inflation.
It is interesting, however, how these arguments for tax cuts are being framed at this year’s conference compared with 2022. Think tanks including The Taxpayers’ Alliance and The Centre for Policy Studies are hosting fringes on tax, but with emphasis on spending restraint (the former hosting an event entitled: ‘Should the Conservatives show spending restraint with an election looming?’). On this point, the government has a lot to answer for, making more promises and spending more money over the past year, which has contributed to limiting the scope for tax cuts. Ministers may have a point that the current economic conditions make it difficult to cut tax right now – but with every additional penny they pledge to spend, they’re making it harder to get the burden down in future.
Comments