DEBATE: Are tax cuts feasible now?

Elliot Keck and Jonathan Gibson

August 11, 2022

Elliot Keck, Investigations Campaign Manager at the TaxPayers’ Alliance, argues YES

When we’re told that tax cuts aren’t currently feasible, it’s worth asking two questions.

The first is, how did we get here? There are exogenous factors of course, Russia and a pandemic chief among them. But underlying this crisis is an overregulated, overtaxed economy which strangles growth in favour of an ever more gluttonous government. We’ve got a cost of living crisis, and a cost of government crisis too.

It’s rarely asked whether tax rises to pay for this are feasible. Whether it’s council tax, corporation tax, income tax, national insurance or the myriad other wheezes that the exchequer uses to fill its boots, the impact is devastating for economic growth and people’s pay packets. Tax cuts dynamically boost growth, investment and earnings. And only by boosting growth and allowing people to keep more of their own money can we get out of this mess.

The second question to ask is what do the opponents of tax cuts want to see instead? Because when they say that tax cuts will drive inflation, through more money being pumped into the economy, they don’t seem to say the same about spending. Government spending has an inflationary side-effect just as household spending does. But God forbid departments shed some of their pet projects and wasteful quangos. The sad fact is many politicians would sing from the rooftops about the benefits of a billion pound spending commitment, while claiming a tax cut worth the same amount is ‘irresponsible’.

But there’s a third question to ask those on the other side of the debate. If not tax cuts now – when Brits are facing the greatest cost of living crisis in a generation, the tax take is at a seventy year high and when growth has hit the buffers – then when on earth will they be feasible?


Jonathan Gibson, Founder of Burst the Bubble UK and Young Voices contributor, argues NO

In recent months, we have heard lots of talk of ‘inflation’ floating around, and numerous warnings from the Bank of England about the need to tackle it. Yet the severity of rapidly rising inflation still seems to be being overlooked by those supporting tax cuts.

Paul Johnson from the IFS compared tax cuts to “putting fuel on a fire. It could make inflation go even higher than it is now.” Inflation is already 9.4 per cent and rising rapidly. Edward Heath’s Chancellor, Anthony Barber faced the same stagflation as we do today. The huge tax cuts just led to government debt ballooning and currency crashing.

Raising interest rates is no solution. Truss’s economics advisor, Patrick Minford, stated that in order to support tax cuts, interest rates may need rise to 7 per cent. With £400 billion in Covid debt and a recession oncoming, how can we possibly afford this? I am about to start University; I don’t want to be paying back the Covid Debt for the rest of my life!

Teachers, nurses, and other public sector workers should also be wary of tax cuts. With less tax revenue, real wages will fall and vital public services will suffer. Public services are already struggling; are we really willing to make funding them that much more difficult?

Tax cuts don’t even help the most vulnerable! The poorest in our society don’t pay tax! Tax cuts will not redistribute the economic losses caused fairly.

Supply-side policies are the cause of the crisis; the Ukraine War and Covid. Lowering taxes won’t change this, nor will it boost productivity. In a shrinking economy, rising interest rates, attracting investing will not be easy.

All government can do is redistribute these losses as fairly and efficiently as possible. Cutting taxes at this difficult time will only worsen the crisis, even if it looks politically attractive.


Written by Elliot Keck and Jonathan Gibson

Elliot Keck is Investigations Campaign Manager at the TaxPayers' Alliance and Jonathan Gibson is Founder of Burst the Bubble UK and Young Voices UK contributor.

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