Even the tax-grabbing fanatics at the Treasury have to face the truth. A Freedom on Information Request has revealed that internal Treasury briefings are making quite the case for a low-tax economy. A document from January this year, delivered to Jeremy Hunt, makes the statistical case. It’s a shame none of its lessons made their way into the budget…
While the Treasury claims that “there have been many important factors affecting advanced economy growth rates“, it is forced to admit in its analysis that “over the 2010-22 period, OECD economies with higher total tax (as a share of GDP) have on average seen lower cumulative GDP growth.” A phenomenon that has been observed for hundreds of years…
“This association applies whether looking at (1) all OECD economies; (2) removing some extreme outliers (Ireland, Turkey, and Greece); (3) removing all OECD economies that are not considered “advanced” by the IMF; and removing Ireland and Luxembourg given their unusual tax policies (presented in the below chart and table) and (4) considering just the G7 and Spain.“
The briefing established what people have been saying for years – that top performers have lower tax burdens: “The US and Canada saw the fastest GDP growth over in the G7 between 2010 and 2022, with the 1st and 3rd lowest tax burdens in the G7.” Any chancellor who wants to deliver a ‘Budget for Long Term Growth’ might take note…
Read the full Treasury briefing below:
Businesses and business groups are making their budget submissions to the Treasury ahead of the Spring Budget. British Chambers of Commons Director Shevaun Haviland says an emphasis on growth is what “businesses are crying out for” before arguing for a significant reduction in business rates. That’s along with the CBI and manufacturers’ organisation MakeUK. The Federation of Small Businesses is pushing for the VAT threshold of £85,000 to be raised to £100,000 to provide vital “breathing space“. Businesses are also pushing for full expensing, introduced in the Autumn Statement, to be extended to leased and rented assets as opposed to only purchased ones. All sound recommendations for kicking the stagnant economy back into gear…
The idiotic and hated tourist tax is also in the firing line of businesses. Hunt should keep in mind that if the UK cut spending on universal credit and disability benefits to pre-pandemic levels it could afford a 3% cut to the basic rate of income tax, a 4% cut to the higher rate, to scrap the additional rate and to scrap inheritance tax. The government’s refusal to stop the expansion of the state is what is pushing taxes up…
Jeremy Hunt is using his time on the slopes in Davos to tease voters that he might be gearing up for more tax cuts in his Spring Budget on March 6th. Speaking to the limousine liberals at the World Economic Forum yesterday, the Chancellor said lower taxes were the “direction of travel”, and that he is “confident” inflation will continue to fall which will leave room for lower taxes, a different stance from when he delivered the Autumn Statement. Chance would be a fine thing…
Hunt admitted voters were “very angry” about the record high tax burden, and that he will focus on “pro-growth policies” to grow the economy and cut taxes. In the biggest hint yet that the government will announce a package of new tax cuts, perhaps the Tories are planning on a return to being the party of lower taxes. As Labour are more more likely to win the election, if the Tories announce tax cuts that Labour would be likely to reverse (e.g. inheritance tax abolition), then Labour would be pushed back to being the party of higher taxes again. An agenda for the 2029 general election?
For all the anticipation about tax cuts and briefings on a possible inheritance tax scrappage, it looks like none of that’s coming anytime soon. Guido hears the Autumn Statement will be free of major retail measures on tax thanks to, as Hunt keeps reminding everyone, a distinct lack of “fiscal headroom“. Too bad that headroom keeps increasing…
Calls for tax cuts from businesses have been fended off by endless think tank warnings about their imaginary dire consequences. It looks like Hunt’s team have been spooked enough to listen. It is also rumoured that any major fiscal measures altogether are getting pushed back to the Spring Budget when Hunt’s hoping to unveil his “retail offer” for the election. Backbenchers are already restless, this won’t help…
Fresh calls for the Chancellor to cut taxes in his upcoming Autumn statement have resurfaced, as according to Resolution Foundation’s analysis of new economic data, Hunt’s so-called “fiscal headroom” is twice as much as it was back in Spring. The amount of money the Treasury can spend whilst hitting the target of getting debt falling within five years was expected to be £6.5 billion. However, the new figure is estimated to be £13 billion. This means Hunt has more taxpayer money to spend on a levy cut between now and the next general election…
Tory MP David Jones called upon the Chancellor to take advantage of the new figures, saying: “The increasing headroom gives Jeremy Hunt the opportunity to realise his ambition to be a tax-cutting chancellor.” Now the Tories have a chance to actually stick to Conservative policies…
Jeremy Hunt is continuing to fend off pressure to cut taxes at Tory Conference, claiming yesterday that they would “compromise” the fight against inflation. Left-wingers are known to argue that tax cuts are inflationary but the facts don’t bear out. Inflation is a monetary phenomenon.
When taxes are cut people will buy more goods and services at the already elevated prices. Meanwhile, wealthier families save the extra money to invest. Disposable income has not been shown to affect inflation. Even the £10 billion cost of living package had almost no effect.
Tax cuts that stimulate production, for example in corporation tax, will be anti-inflationary. As inflation is caused by a growing amount of money chasing a reducing amount of goods and services, then tax cuts that stimulate production will bring the level of inflation down by increasing supply. It’s basic economics… the main reason we don’t have tax cuts is because the government doesn’t want to cut spending.
