Few things in British politics are more glumly predictable, whatever the economic and political circumstances, than Conservative MPs and their rightwing media echo chamber demanding budget tax cuts. Reducing the tax burden for the less well-off undoubtedly has a place in an even-handed approach to Britain’s economic challenges. The tax system also needs reform. But renewed backbench calls for cuts in personal taxes in advance of Jeremy Hunt’s pre-election budget reveal a party that has learned nothing.
It is only 18 months since Liz Truss and Kwasi Kwarteng brought the UK economy to its knees by pursuing exactly this approach. Sterling crashed to its lowest level against the dollar in half a century after they declared their tax-cutting budget was just the start. Borrowing costs spiralled. The package also inflicted what may prove to be irreparable damage on the Tory party’s electoral standing. For the chancellor to do anything next week that smacks of that approach would be both reckless and unjust.
That some tax-cutting measure or other will nevertheless be unveiled, doubtless to the accompaniment of backbench cheers, is probably inevitable next Wednesday. The theatrical side of Conservative parliamentary politics may require such a thing. But it would shame the government. Desperate gestures of this kind seem increasingly typical of a party which, as Rishi Sunak’s ludicrous warnings of mob rule show, seems to possess a bottomless capacity for fixating on the wrong things.
The economic reality is that the scope for tax cuts is small and that they are already overshadowed, under the current fiscal rules, by the need for taxes to rise to pay for public services. The Institute for Fiscal Studies showed any likely cuts will fail to dent an ongoing overall increase in taxation anyway. A cut in inheritance tax, much touted on the right, would benefit only the already very well-off. If the fiscal deficit is meant to narrow, any reduction would portend further spending cuts after the election.
The idea that any of this would be transformative either for the economy or for the Tory party’s standing is for the birds. The 2p cut in national insurance last autumn did nothing to boost the Conservatives’ poll ratings either when it was announced or when it took effect. Tory tax cutters ignore such facts because they do not want to face the reality, illustrated in new poll findings from the Tony Blair Institute, that the public prefers long-term investment in public services to tax cuts. In short, the Tory party’s supposed panacea is both bad economics and bad politics.
Low taxes were always a feature of the Conservative party’s stance. But it is only in the past half century that the policy has been transformed into a kind of fiscal fetish. Much of this is due to a rewriting of Conservative history under Margaret Thatcher, in which tax cuts have come to be treated as the litmus test of true Toryism and as a surefire guarantee of electoral success. In fact, they are neither. Tax cuts may boost a party when they are seen as a reward for successful handling of the economy. But if they look like a giveaway at the expense of the rebuilding of the NHS and the public realm in difficult times, they deserve to be seen for what they are – an act of stealing from the public.
