In advance of yesterday’s Budget, Rishi Sunak was keen to remind everyone of his supposedly low-tax, fiscally conservative outlook. In an interview with Sky’s Trevor Phillips on Sunday, the chancellor struck a conciliatory tone, offering a hint of what was to come. Tax cuts are “what I’d like to deliver”, Sunak told the presenter; they are “where my instincts are”. With caveats now suitably applied, Rishi then cut to the chase, explaining somberly that he must “take the world as it comes”.
Despite claims of prudence and tax cuts, the underlying message from the government in the preceding days and throughout the event itself was pessimistic – the current high-tax environment is inevitable. With this in mind, taxpayers who tuned in to watch Rishi at the despatch box yesterday are bound to ask why ministers continue to embark on so many enormous spending commitments.
High Speed Two, with projected costs soaring to £150 billion, is perhaps the most notable example. The government continues to steam ahead with this unloved, unnecessary project; all the while expecting taxpayers to believe that digging deeper into their pockets is the only way to balance the books.
That isn’t to say the chancellor didn’t offer up some wins for taxpayers. A new Charter for Budget Responsibility will hopefully enforce a healthier attitude towards borrowing, and slashed and simplified alcohol duties will give the hospitality industry a much-needed helping hand. So too reformed business rates will ease the burden on bricks and mortar businesses. But with a punishing national insurance hike on the horizon, the income tax threshold frozen and all sorts of green levies looming ominously over the ledger, the overall tax burden is surging at an alarming rate. As the latest TaxPayers’ Alliance research shows, the tax burden next year will hit its highest sustained level since 1951.
It’s little wonder therefore that the Conservatives are steadily losing their reputation as the party of low tax. As our recent polling shows, only 31 per cent of voters trust the Conservatives the most on “keeping taxes low for people like you” (compared to 34 per cent for Labour). In addition to this exercise, we spent the fortnight before the Budget visiting high streets across the country, asking the British public what issues they wanted to see addressed. While topics varied, it was striking how consistently concerns over the cost of living dominated conversations. People are deeply worried at the sight of their everyday bills increasing, and the perceived lack of concern from politicians. A government intent on grandiose, big-picture projects such as “levelling up” runs the risk of losing sight of the immediate and pressing concerns of ordinary taxpayers.
For all of his bluster about cutting taxes, the chancellor cannot escape the basic truth that his government is compounding the tax burden by choice. Instead of hiking national insurance on low-income households, we could be looking at solutions to better automate and digitise our health service. Instead of setting arbitrary spending targets which inherently lead to waste, we could be sending aid overseas on a needs basis. This high-tax, high-waste environment persists because the government is unwilling to steer clear of the “easy” solutions and think radically about how to deliver better public services for less.
Yesterday marked an important fork in the road for the nation’s finances. This was an opportunity for the chancellor to take stock of the lessons learnt from the pandemic and lay the foundations for the low-tax, growth-enabling economy that households and businesses are crying out for. Instead, this high-spend, window-dressed Budget will leave taxpayers bracing for higher bills and unyielding regulation. When all was said and done, Rishi clearly didn’t trust (or deliberately ignored) his instincts.