Tory MPs Continue To Pressure Rishi Sunak For Tax Cuts As He Plans Big Reset
Former secretary of state Simon Clarke will continue to put pressure for tax cuts on the government from the backbenches (Alamy)
Conservative MPs have accused the government of getting the “balance wrong” between aiming to slow inflation and holding back on tax cuts ahead of the Autumn Statement.
One of the Prime Minister’s five pledges for 2023 was to cut inflation, and he has hinted that there will be no tax cuts in the upcoming Autumn Statement due to fears they would cause inflation to increase. Treasury minister Victoria Atkins has, however, pledged to simplify taxes to boost the economy.
However, the latest figures from the Office for National Statistics released on Friday show that the UK economy was 0.6 per cent larger than pre-pandemic levels by the end of 2021, meaning the UK had the third fastest recovery in the G7. The UK’s annual inflation rate also fell to 6.8 per cent in July, from 7.9 per cent in June, although some economists warned the government's inflation target might still be missed by the end of this year.
These glimmers of economic hope have encouraged further calls from some Tory MPs who are insistent the government must deliver tax cuts sooner rather than later.
Conservative MP Simon Clarke, one of the leaders of the Conservative Growth Group (CGG), told PoliticsHome that the group would continue to push for tax cuts as parliament returns from summer recess and that they are working "closely" with government.
“If the Treasury logic is going to be that no tax cuts are possible over the course of the next year because of the inflation consequences, I think that's wrong and that gets the balance wrong,” he said.
“I'd like to see a very clear commitment that we will lower the burden of tax before the election.
“I'm not going to say Jeremy [Hunt] must cut taxes in November, but I certainly think we have to announce tax cuts in the spring.”
Clarke, who was a cabinet minister under both Boris Johnson and briefly, Liz Truss, said his priority would be to cut the basic rate of income tax.
According to the Sunday Telegraph, Sunak wants to make a two pence cut to the basic rate of income tax before the general election, expected in 2024, as he promised to slash the rate in his leadership campaign last summer.
“I would like to see something of that nature brought back before we go to the polls because it would demonstrate seriousness of intent,” Clarke said.
In Truss and former chancellor Kwasi Kwarteng’s “mini budget” last autumn, they pledged to abolish the 45 per cent additional rate of income tax on income above £150,000 – a policy which was then scrapped after is created havoc in the markets, and attracted widespread criticism across the political spectrum. Clarke, however, still regrets it was not seen through.
“I think it was the beginning of the end when we retreated from that,” he told PoliticsHome.
“It's entirely politically driven. It's not as far as I can see a revenue raiser, it's just something that is performative that too many Conservatives lost their bottle over last year, which I regret.
“It was a booby trap set by [Gordon] Brown in the final weeks of his time in No 10 in 2010 and we’ve never dared to diffuse it.”
Clarke added that he believes it would be wiser for the government to call a general election in the spring of 2024 rather than wait until autumn.
“My own sense is that the fundamentals economically are not likely to change enormously in the course of next year,” he argued.
“The worst of the inflation crisis is probably already behind us, then I suspect  will be quite a bumpy year because of the resultant knock on effects on the real economy, so I think that there's probably a fair economic case for saying that the best moment for an election might be the first half of next year rather than the second.
“I believe that going in May would show confidence. It would be a positive affirmation of our confidence in our agenda and it wouldn't be holding on to the last moment, which historically hasn't ended well for governing parties, either in 1979 or 1997.”
Clarke, who briefly served as Secretary of State for Levelling Up, Housing and Communities when Truss was prime minister, admitted he would “love” to be back in government, but intends to push the “growth agenda” from the backbenches.
“I would obviously love to be back in government, I miss being in government, but it is surprising how from the backbench you can make a difference,” he said, describing it as a “healthy tension” between putting constructive pressure on the government and “making life difficult” for them.
“We need to build the overarching moral mission of government into the overall narrative about why a Conservative government is right for Britain. My lasting regret over the last year is that we've lost a bit of a sense of why that matters so much and we need to recapture it because we do have a good story to tell.
“The opposition frankly, has benefited largely from our failure to do so rather than anything brilliant that they've done. We need to get back into a stronger position.”
Clarke is not alone in calling for tax cuts, with the membership of the CGG reportedly representing around 17 per cent of sitting Conservative MPs.
He said the CGG will continue to “work closely” with the government and call debates in parliament. In the coming months, they will publish papers on housing policy and public infrastructure, which Clarke said will be key themes going forward for the group.
Conservative MP and deputy chair of the Brexit-supporting European Research Group David Jones said he was particularly concerned about corporation tax rates, the main rate of which is currently at 25 per cent, up from 19 per cent in the previous financial year.
“At the moment, every signal we're getting is that there will be no further tax cuts and I think that's worrying,” the former secretary of state told PoliticsHome.
“I'm particularly concerned about corporation tax because the country is losing whatever competitive edge it has. The level of taxation we have at the moment is resulting in insufficient growth and we need to stimulate the economy.
“We've got increasing national cost burdens such as the NHS, and the only way that you can actually fund such high levels of public expenditure is by growing the economy and high levels of tax are having an adverse effect upon it, so I think it's essential that the government puts in place measures for growth. And what we've got at the moment doesn't actually do that.”
He added that he is in favour of abolishing inheritance tax altogether: “One very Conservative tax cut that the government could pursue, at relatively low cost, would be to abolish inheritance tax, which is a tax that's resented by everybody, even people of modest means.”
Clarke, however, disagreed, saying that although he “doesn’t like it”, he thinks other tax cuts need to be prioritised in the “current economic situation”.
“In a perfect world, I would do that,” Clarke admitted.
“But if it's a choice, and it is a choice always, then I would act on marginal family finances.”
If Sunak and Hunt do not announce tax cuts in the upcoming Autumn Statement, the pressure will be on the government to eventually deliver on Sunak’s leadership pledges in 2024.
Jones insisted that the time for tax cuts is now, but if they do not arise, he hopes that they will be delivered next year.
“[The government] said they will, so I can only assume that they will… I have to believe what my government tells me.”
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