British conservatism is lurching from one crisis to another

No. 10 quickly asserted that the meltdown at National Air Traffic Services was a technical issue rather than a cyber attack. This was presumably meant to be reassuring. It is anything but. It speaks, once more, of a Britain with creaking infrastructure, where national paralysis has become a regular occurrence. The highest tax revenues in peacetime history have not created a properly functioning country.  The breakdown was caused by a single mis-filed flight plan. That such havoc can result from one trivial event does little credit to the organisation entrusted with our airspace. This week’s event may not be a cyber attack, but hostile states and organisations will be taking

Can the Tories come up with a tax offer in time?

Last summer, all the Tory party could talk about was tax. It was at the heart of the leadership contest and the dividing line between Liz Truss and Rishi Sunak. The then foreign secretary promised to move fast and bring in deficit-financed tax cuts; the former chancellor said this would end in tears and instead pledged fully funded cuts over six years. Neither plan saw the light of day. All talk of tax cuts was suspended after Truss’s mini-Budget, when the premise of her borrow-and-spend agenda was tested to destruction. Since then, tax has become a difficult topic to bring up. Even within Tory circles, calls to cut tax are

Matthew Lynn

Only one tax cut can save Rishi Sunak

Rishi Sunak’s promises on tax are lacklustre. He’s announced a fiddly one-off tax break on energy that will last for just a year which hardly anyone will notice due to inflation. There’s also income tax cuts up to seven years in the future, even though he is hardly likely to be Prime Minister by then (and he seldom keeps any promises on taxation for more than a few hours anyway).  Sunak’s promises and u-turns on taxes are making him look inconsistent at best, and a cynical opportunist at worst. The Tory members are right to regard his words with suspicion. But there is one tax cut that could still win the membership over: abolishing inheritance

How to increase your home’s value – with a sandwich

It is a tenet of neo-liberal economics that there is no such thing as a free lunch. This is obvious baloney. There are free lunches everywhere. The problem is that those free lunches are no longer served to people doing useful work. They are instead handed out to the owners of a few favoured asset classes through untaxed gains. We have created far more tax breaks for rent-seeking than for productive work… and then we wonder why Britain has a productivity crisis. Under a future Sutherland regime, there would be no tax paid on beer drunk in a pub I must admit I enjoy a few free lunches myself –

How ‘hour’ ticked into our language

‘Why is there water all over the bathroom floor?’ asked my husband, without doing anything about it. It was my fault. During a bank holiday soak, I heard the Radio 4 book serialisation of Hands of Time by Rebecca Struthers say that ‘the origin of the modern word hour’ is the Egyptian god Horus. I rocketed up a few inches, like a surprised killer whale, then flopped back down, displacing a few cubic inches of water each side. It’s funny how ordinary words attract erroneous stories. Hour does not, of course, come from Horus. Few English words come from ancient Egyptian; pharaoh and oasis are exceptions. Hour derives from Norman

The truth about corporate taxes

I’ve chosen to write about corporate tax rates this week not because they’re the sexiest subject available but because – unlike the government’s frontbench, the value of the pound and the scale of winter fuel bills – they’re unlikely to change dramatically during the shelf-life of this column. An increase in corporation tax from 19 per cent to 25 per cent, originally announced by Rishi Sunak, will go ahead in April, despite new Chancellor Jeremy Hunt’s own leadership campaign pledge to cut the rate to 15 per cent, which would have placed the UK between Ireland and Singapore in competitive tax tables. The uplift will, we’re told, tip £19 billion

Scrapping inheritance tax is a terrible idea

There is no hole deep enough that a Conservative minister cannot muster the spadework to excavate it to even greater depths. No sooner had Kwasi Kwarteng announced that he was dropping his proposed reduction in the upper rate of income tax, than Andrew Griffith, one of his ministers at the Treasury, declared that he would like to see inheritance tax abolished. ‘I have lots of my fantastic local association [members] with me here and they will know because they asked me at my selection meeting 27 months ago which tax, if I had the choice, I would most like to see eliminated. History will record it was inheritance tax, ’he

The audacity of Kwarteng’s tax cut for the rich

George Osborne dreamed about it and Rishi Sunak told friends that he’d like to do it if everything went well and he was feeling brave. But this morning Kwasi Kwarteng has gone ahead and done it.  The ‘additional rate of tax’ – set up by Gordon Brown as a trap for the Tories in 2009 – has just been abolished. Right now, those earning more than £150,000 per year will pay 48.25 per cent on every pound they earn (45 per cent income tax plus 3.25 per cent National Insurance). From April next year, it will fall to 42 per cent (40 per cent income tax plus 2 per cent NI).

The real difference between Sunak and Truss’s tax policies

The Tory leadership race is becoming a test of patience. Today Rishi Sunak has laid out his plan to slash tax: not in a matter of days or weeks, as Liz Truss has pledged to do, but by the end of the next parliament. He’s promised to reduce the base rate of income tax by 20 per cent, by taking 1p off income tax in 2024 (as already pledged) and an additional 3p over the next parliament. As Fraser Nelson notes on Coffee House, the timing of this announcement is working against him: it’s easily characterised as a u-turn on tax cuts, when in truth the former Chancellor is far

The unspoken argument behind a windfall tax

The Financial Times story on Rishi Sunak looking at a possible windfall tax on energy firms captures how difficult such a tax is for any government, especially a Tory one. Because it begs questions why, when electricity suppliers suffered unsustainable losses in autumn and winter, when under the price cap they suffered huge and unsustainable losses – what you might call a reverse windfall – they were allowed to go bust. If you believe in capitalism and competition, you believe in swings and roundabouts: windfall profits in good times are the obverse of extreme losses in the bad. Kwasi Kwarteng repeated that mantra as failing electricity suppliers would not be

How much did Emily Maitlis cost licence fee payers?

Off duty How many non-doms are there in the UK? – In the year ending 2020, 75,700 people filled in a tax return in which they declared themselves to be non-domiciled – down from 78,600 the previous year and 137,000 in 2008. – Of the 75,700 in 2019/20, however, only 62,200 were actually resident in Britain. – In spite of their non-domiciled status, which does not oblige them to pay tax on foreign earnings, the 75,700 people still paid £7.85bn in income tax, capital gains tax and national insurance. – The highest number of non-doms in 2019 were resident in London (45,200), followed by the South East (10,400). The fewest

The war on workers

It is been a familiar story in recent years: a Budget that sounded reasonably good when delivered, but that unravels in subsequent days. Rishi Sunak’s spring statement was no exception. When he delivered it a fortnight ago, he said he was going to compensate low-earners by raising the primary threshold for National Insurance, bringing it into line with income tax and relieving people who earn less than £12,500 from having to pay NI at all. But as the 1.25 percentage point rise in National Insurance kicks in today, it turns out that the rise in the threshold for NI will not take effect for another three months, on 6 July.

Should the young pay less tax than the old?

In evolutionary terms, it is obvious why we get more conservative with age. Two strong forces, acting in the same direction, lead us not to bet on rank outsiders when we’re nearing the last race of the day. First, older people have more experience to draw on when making decisions: if you already know what you like, the need to experiment is much less. But that’s not all. The elderly also have far less time remaining to benefit from experimentation. If you happen on a new cuisine, band, social circle or holiday destination in your twenties, you have many decades to profit from the discovery. Someone in their sixties might

Is Biden trying to crash the economy?

A war is raging in Ukraine. Inflation has risen to a 30-year high and may have started to spiral out of control. The country is on the brink of recession, and a gaffe-prone leadership is under increasing fire. You could be forgiven for thinking that President Biden has more than enough problems right now. But he is about to make his already miserable term in the White House a whole lot worse. How? By adding a stock market crash, and the destruction of America’s best companies, to the already worryingly long list of self-inflicted disasters. It is hard to think of a single tax that could be worse for growth

The Chancellor’s difficult choices

The Office for Budget Responsibility was designed to protect the Chancellor from accusations that he is cooking the books. If the forecasts are prepared by an independent body, there can’t be the suggestion – as there often was before the OBR’s creation in 2010 – that they have been politically influenced. But what the OBR cannot do is eliminate uncertainty. In recent years, the likely trajectory of the financial future changed quite a lot from one month to the next: from interest rates and inflation to the Covid pandemic and Russia’s invasion of Ukraine. The OBR itself admits that it had to conduct its work without knowing the full economic

The return of fiscal conservatism

Next month, Rishi Sunak will break a Tory manifesto pledge by increasing National Insurance as the tax burden heads to a 77-year high. By declining to increase departmental spending for inflation – and using the saved money to cut the basic rate of income tax – the Chancellor has started a cautious fightback against Big Government conservatism. Much has changed in the two years since Sunak took over as Chancellor. Back then, inflation appeared dead and buried: long-term forecasts did not envisage it going above 2 per cent. Sajid Javid, Sunak’s predecessor, said he expected rates to be ‘low for long’ – and planned to borrow and spend on that

Rishi Sunak has just defined the next election

The biggest surprise of Rishi Sunak’s spring statement was the announcement that the basic rate of income tax will be cut by one penny come 2024. This is the first cut in the basic rate since the cut to 20p announced by Gordon Brown in his last Budget in 2007, which was of course partly paid for by abolishing the 10p starting rate of tax. Cynics will be quick to suggest that there is a long way to go before 2024 and so the tax cut might not happen. But this is to ignore the politics. The most likely date for the next election is May 2024. It would be bizarre,

Can Sunak prove he’s a low tax Tory?

When Rishi Sunak first envisaged this year’s spring statement, the idea was that it would be policy light. Instead, it would serve as an economic update on the latest forecast and give him a chance to lay out his broad tax aspirations for the year ahead. However, Russia’s full-scale invasion of Ukraine means that the goalposts have moved. The Chancellor has had to adjust to the fact that he has come to the end of one crisis only to be greeted by the next. With the economic fallout from Ukraine only exacerbating the cost of living crisis, Sunak is under pressure to announce measures to ease the pressure on households. So, what

Sunday shows round-up: Sunak says Ukraine and Brexit are not ‘analogous’

Rishi Sunak – Brexit vote and Ukraine resistance ‘are not analogous’ The Chancellor was in the TV studios this morning, ahead of the Spring Statement that he will deliver on Wednesday. Economic issues, like much else, have been cast into the shadows over recent weeks as the spotlight has inevitably focused on the Russian invasion of Ukraine. Even today was no exception, as in his interview with the BBC’s Sophie Raworth, Rishi Sunak was first asked to address a stir caused by the Prime Minister’s remarks at the Conservative’s spring conference yesterday in Blackpool: Government’s energy support ‘will make a difference’ Turning to Sunak’s brief, Raworth asked about the rising cost of living

Why windfall taxes are a rotten idea

Annual profits of £9.5 billion at BP this week followed a £20 billion jackpot at Shell last week, thanks to soaring global wholesale energy prices that BP boss Bernard Looney recently said had turned his company into a ‘cash machine’. For the very same reason, Ofgem has announced a 54 per cent (roughly £700) increase in the energy price cap for 22 million UK customers, while the Chancellor is scrabbling to keep at least some of those households out of ‘fuel poverty’ by offsetting half the rise with a £200 energy discount, to be recouped over five years, plus a £150 council tax rebate. As investors in the oil giants