Increasing the minimum wage is the best way to help the lowest paid with the cost of living
The cost of living is certainly the biggest challenge facing the government and it is closely related to the other major challenges we are living through – the ongoing fallout of the Covid-19 pandemic and the Russian invasion of Ukraine.
The repeated shuttering of the Chinese economy, the dash for energy as factories worldwide start up once again, and the strain placed on global food supplies by the war in Ukraine are a heady mix with which governments the world over are grappling.
Not all governments will survive the assault of rising energy prices and inflation. The problem governments have is, contrary to what central banks have been telling us, inflation is not transitory. For a number of reasons, it is set to remain stickier than many policymakers believe. It is with this in mind that we need to think of longer-term support for the vulnerable.
One very positive step would be further increases in both the National Minimum Wage and the National Living Wage. This will put more money into the pockets of the lowest paid, thereby helping those most affected by the rising costs of living caused by this inflationary environment.
Raising taxes, particularly corporation tax, is a recipe for falling tax revenues over time
These minimum wages were both increased healthily in April, but inflation has substantially increased since then and all indications are that it will continue to do so this year. Action is therefore required, and this course of action could be almost immediate.
It is true that this will represent an increased cost to business, but Britain will remain a competitive place to do business. It would also serve the wider agenda of encouraging the transition towards the high-tech, high-skill and high-wage economy of the future. Businesses need to invest in their workforce and company in order to thrive.
One way to help offset the increased wage costs would be to scrap the looming – and substantial – increases in corporation tax. Raising taxes, particularly corporation tax, is a recipe for falling tax revenues over time. Cutting these taxes help businesses, spur on greater growth and employment and boost the tax take across the medium- to long-term. Low corporation tax also works as a spur to international investment, as companies take advantages of the welcoming pro-business environment.
In addition to lowering taxes on business, the Chancellor should also bring forward the promised cut in personal income tax. Allowing people to keep more of their pay will provide a further cushion to the rising costs of living. Benefits for those not in work should also be revisited.
Meanwhile, in order to help raise money for the government to pay for these policy changes, I still believe that HS2 should be cancelled. The original rationale for this vast project has disappeared – the pandemic showed how advances in telecommunications allow people to work effectively remotely. Cancelling the project even now would still save the government in excess of £80 billion, and perhaps still more if costs continue to rise.
Finally, the government should put serious effort into addressing the thicket of quangos. Even modest savings could save many billions of the estimated £206 billion that these bodies currently cost in total, according to the Taxpayers’ Alliance.
John Baron is the Conservative MP for Basildon and Billericay.
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