Matthew Lynn Matthew Lynn

Don’t be deceived by Jeremy Hunt’s tax ‘giveaways’

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When Jeremy Hunt takes to his feet in the Commons this afternoon to deliver his Autumn Statement, he’ll be trying to woo voters with some tax ‘giveaways’: VAT thresholds might be raised to help small businesses and the basic rate of National Insurance could be reduced for the rest of us. But hold on. Before the Chancellor gives anything back, both he and the Prime Minister Rishi Sunak need to do something far more important: they should apologise for all the tax rises the Tories have imposed.

We don’t know the final figure yet, but it turns out that the Chancellor has around £13 billion to £15 billion of ‘headroom’, as the fiscal jargon has it, to cut taxes. And yet, while Hunt will try and present his measures today as an act of generosity from a chancellor getting the economy back on track, isn’t this a sign of something else: that for too long the Tories have clobbered ordinary people with a sky-high tax burden?

Despite the fanfare, the tax cuts today will be relatively minor

If you rewind just twelve months, the usual suspects and think tanks were clamouring for tax rises to ‘balance the books’. As it turns out, these tax rates didn’t need to be quite so steep. Those who said taxes were too low were all completely wrong in their forecasts. The result? The government has taken more money out of the economy – and people’s pockets – than it needed to. 

That has done huge damage. The rise in corporation tax has reduced investment, and although the allowances introduced today will help offset some of that, there are factories that have remained unbuilt and offices that are not let out because of it. The freezing of allowances has destroyed the incentives to work.

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