Rishi Plans to Hand Out Pennies and Take In Pounds
Before he stands up tomorrow, the Chancellor has already scheduled a stealthy hit to your take-home pay from the changes he made last time he stood up. Briefings in the press suggest he plans to reduce fuel costs by a few pennies. This is nothing compared to the pounds he is pinching from your annual take-home pay, with a combination of increased NI contributions and the freezing of tax thresholds in an inflationary environment. Lower rate taxpayers will lose an estimated £265 and higher rate taxpayers will get £952 swiped by Rishi.
Rishi’s schtick when he does media rounds is to claim he is doing this in the name of “fiscal conservativism”, the policy stance which aims to balance the books without increasing borrowing. You can only balance the books by increasing taxes or cutting spending. Currently the government is overspending by about £400 million a day – the state borrowed £13.1 billion last month – surely the fiscally conservative thing to do is to rein in over-spending. That is politically impossible if you don’t explain that the government can’t do everything. Public discourse across the political spectrum seems to be that something must be done to fix high energy costs. Borrowing money from taxpayers in the future to pay for their current energy consumption doesn’t seem fiscally conservative, it seems reckless and politically short-sighted.
Last time Rishi stood before the House in October he solemnly introduced two new fiscal rules:
- Underlying public sector net debt must be falling
- The state should only borrow to invest in future growth and prosperity – day-to-day spending must be met by taxation
So if there are to be any government handouts to energy consumers it must be funded by them out of taxation. This must be the circular economy we hear about so much…
Fiscal conservatives don’t balance the books by always increasing taxation to match spending, they hold the line on spending. The truth is we haven’t had a fiscally conservative Chancellor since Nigel Lawson. It is a sorry fact that no one under 40 years of age has ever seen the overall tax burden go down in Britain. Despite 20 years of Conservative governments since Lawson, the state has expanded, taxes have gone up and growth has been slow. China is cutting taxes to stimulate the economy because they have come to realise you can’t tax your way to prosperity.
Rishi would argue that with interest rates rising, taxes will have to go up to service the government’s debts. This is a pessimistic outlook. Grow the economy and taxes will flow, increase taxes on the economy and it won’t grow. Britain has reached the taxable limit of the economy…