Stride warns of pressure on Chancellor to increase taxes
Mel Stride, chairman of Parliament’s Treasury committee, tells Tom Rees there are many questions to be asked about the Chancellor’s plans
‘Tax is going to be very central to the whole issue of fiscal consolidation and how we deal with the deficit’
BORIS JOHNSON’S promise not to hike key taxes will come under immense pressure as officials are forced to raise revenue to pay off the country’s Covid-19 bill, the chairman of the powerful Treasury committee has warned.
Mel Stride, head of the backbench group of MPs, urged the Chancellor to provide a road map to reining in public debt at the autumn Budget and said markets need to be “reassured”.
The former Treasury minister and Leader of the House of Commons said the “pressures on tax will be potentially very considerable”, noting that the public appetite for big spending cuts to reduce borrowing is “limited”.
The Conservative manifesto promised not to raise income tax, national insurance or VAT before Covid-19 sent borrowing surging. Mr Stride said the three taxes can “raise significant amounts of money”.
“They are three of the biggest ones you would turn to so it may be that there are going to be some very very hard decisions around tax,” Mr Stride told The Daily Telegraph in his first major interview since becoming chairman last October.
“Tax is going to be very central to the whole issue of fiscal consolidation and how we deal with the deficit.”
The committee launched an inquiry into the tax system after Covid-19 on Friday as economists warn the Chancellor will need to shore up the public finances. Government debt has surged to above 100pc of GDP with the budget watchdog predicting borrowing will hit £372bn this year.
Mr Stride said tax will play a role in addressing “this big issue around intergenerational fairness”.
He said Covid-19 had “reinforced” inequalities between generations and warned there “might have to be some radical things that Government does”.
‘There are questions around the job retention bonus and the dead weight there may be within that scheme’
‘Tax is going to be central to the whole issue of fiscal consolidation and how we deal with the deficit’
Ministers, watchdog chiefs and rate-setters have had their feet held to fire from spare bedrooms and cramped studies since the pandemic struck. Mel Stride, chairman of Parliament’s Treasury committee, is embracing the new normal of interrogating the powerful on Zoom calls.
He says the virtual version of what is considered the most influential committee of backbencher MPs has been “smoother than I expected” and “has enabled us to reach out to witnesses that we wouldn’t be able to”, recently grilling the chief economists of the International Monetary Fund and OECD.
“You do miss out on some of the interactivity that might be there if you are sitting around the table catching people’s eye,” he admits, but Stride, a Conservative MP and former Treasury minister and Leader of the House of Commons, hopes to adopt a “hybrid model” for his committee when normality eventually returns.
First, however, he has the small matter of holding Rishi Sunak and the Bank of England to account for an economic rescue that was bigger in scope and reached further into our lives than any other in living memory.
He gives the Chancellor a “high score to date” but warns “it will get more challenging”.
“The overarching intent is entirely right but we need to lift the bonnet on some of the detail of what he has done,” Stride says on Sunak’s latest economic aid package. “I think there are questions around the job retention bonus and the dead weight there may be within that scheme.”
He adds there are questions hovering over the stamp duty cut and the Chancellor’s decision to target the hospitality industry – “These are all things I think we need to go into as a committee.”
The role of the cross-party group of backbencher MPs is to examine fiscal policy and monetary policy through inquiries as well as scrutinise regulators, such as the Financial Conduct Authority and Office for Budget Responsibility, and the finance industry. It reviews and helps to shape policy and has been given new powers since 2010, such as the right to veto appointments to the OBR and forcing regulators to produce detailed reports.
Stride, who was briefly Leader of the House of Commons and has been committee chair since being elected last October, has big shoes to fill. The last permanent chairs were Baroness Morgan and Andrew Tyrie, now chair of the Competition and Markets Authority. The reputation of the committee was burnished under the leadership of the latter in particular following the financial crisis, with Tyrie branded the “scourge of the City” for his relentless interrogations.
Stride’s early appearances suggest he will be a less aggressive inquisitor and his comfortable victory in the election was not without controversy. He won when many potential competitors linked to the role – including Justine Greening and David Gauke – were expelled from the Conservative Party.
Opposition MPs also warned Stride would be “marking his own homework” after only leaving his ministerial role as Financial Secretary to the Treasury five months earlier.
MPs raised concerns in particular around his role in the so-called loan charge policy, which some wanted to investigate. The policy tackled a type of tax avoidance scheme where contractors were paid through loans but some were facing huge HMRC bills stretching back 20 years with the policy linked to at least one suicide.
Stride vows to hold the Government to account “without hesitation” but insists he would not change the loan charge policy in hindsight: “99.8pc of taxpayers don’t go anywhere near those schemes and most of those people would find them deeply troubling if the details of those schemes were explained to them.”
Nonetheless he has sought to shake off any accusations of being a “gamekeeper turned poacher” or too close to the Treasury, and warns there are “some very serious gaps” in the Chancellor’s support and says his committee will be recommending ways to plug them.
Stride says many workers have fallen through the cracks of Sunak’s income support. He highlights new starters, freelancers on short-term contracts and directors of limited companies that are largely paid through dividends as some of those currently suffering hardship.
“If you add all those people up, it’s certainly more than one million and they are no different fundamentally from all the other people that have needed support. They are facing in many cases a huge loss of income so the Treasury needs to do better in that area.”
Before being elected an MP in his late 40s, Stride, now 58, first started his own business working in trade exhibitions, conferences and publishing in the UK and US.
He became MP for Central Devon in 2010 and says he was first interested in politics during the electoral strife of 1974, when Britons were sent to the polls twice to return Labour to power.
Stride says the humble beginnings of his parents and his own education at a grammar school and then the University of Oxford convinced him that “politics really matters when it comes to opportunity... and it seemed to me at the heart of the Conservative Party that was a very strong philosophy.”
Opportunities could be in scant supply for many Britons after Covid-19 wreaks economic havoc. Stride believes difficult decisions are ahead for the Chancellor, particularly on tax, amid dire warnings from the OBR on the need to shore up the public finances after the coronavirus.
The Government has been left with a debt pile at around 100pc of GDP, levels not seen since the 1960s. With growth unlikely to be an effective cure, most experts expect spending cuts or tax rises will be needed to stop public finances becoming unsustainable. Amid a backdrop of austerity fatigue, tax rises are seen as the most likely, if not only, remedy.
“Tax is going to be very central to the whole issue of fiscal consolidation and how we deal with the deficit,” says Stride. He urges the Chancellor to provide a road map for the public finances at the Autumn Budget.
“The pressures on tax will be potentially very considerable and obviously in the manifesto there was the triple lock for no increase in the rates of income tax, national insurance or VAT. The problem is those are three very heavy-lifting taxes.”
He warns that “very, very hard decisions” will have to be taken on tax.
The Treasury Committee has launched a sweeping inquiry into tax after Covid-19 and Stride says he wants to look at “intergenerational fairness” in particular. “When I went to university it was paid for by the state, that is now not the case. When I was younger I could just about get on the property ladder, a lot of younger people are struggling to do that.”
He says younger Britons have a “tougher deal when it comes to life changes and the economy than older people”, and are bearing the brunt of the crisis caused by the virus.
“I think now is a very timely moment to have a good look at tax. There might have to be some radical things that Government does.”
Mel Stride was accused of being a ‘gamekeeper turned poacher’ when he became chairman of Parliament’s treasury committee