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

The Daily Telegraph - Business - - Front Page - By Tom Rees

‘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

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