Tory vow to cut tax for workers

Revealed: Hammond tells businessmen burden WILL fall as the economy grows

PHILIP Hammond is drawing up plans for a new Tory tax pledge that would guarantee the overall tax burden on ‘working people’ is cut as the economy grows.

The Chancellor is urging Theresa May to use the Conservatives’ manifesto to ditch David Cameron’s controversial ‘tax lock’, which guarantees no increases in income tax, National Insurance or VAT, arguing it leaves too little ‘flexibility’ to manage the economy.

In its place, he is looking to make a broader pledge that would see ‘the burden of taxation on working people falling’ as the economy grows.

Speaking at a private breakfast meeting this week, he told an audience of businessmen that the Tories would ‘go on demonstrating’ they are the party of low taxation.

According to a source at the meeting, he said: ‘In our DNA, we are a low-tax party. None of us – me, Theresa May – came into politics to see taxes going up. We are in politics because we want to see taxation low and as the economy grows ideally the burden of taxation on working people falling.’

Tory ministers are also debating whether to keep the 2015 pledge to raise the threshold for paying 40p tax to £50,000. Some want to focus resources on raising the personal allowance, while others argue that the party has a duty to also help those on higher incomes.

Mr Hammond’s comments suggest the Tories are looking to revive the principle of Mr Cameron’s previous pledge to ‘share the proceeds of growth’, which was abandoned in the face of the 2008 recession.

Sources confirmed Mr Hammond is interested in the idea of guaranteeing that the overall tax burden will fall as the economy grows.

This would leave scope for limited tax rises in the future. And it would also leave him huge flexibility over managing the economy.

Mr Hammond ran into trouble with the ‘tax lock’ in last month’s Budget when he tried to mount a £1billion National Insurance raid on the self-employed. The move ended in a humiliating U-turn days later after Tory MPs protested it broke the manifesto pledge.

The new, looser pledge would allow him to raise individual taxes while forcing the Government to drive down the overall tax burden over time. He indicated it would allow voters to make a clear choice between a ‘low-tax’ Tory government and a Labour Party committed to raising taxes and borrowing an extra £500 billion.

At his breakfast meeting this week, Mr Hammond also hinted at fresh investment in infrastructure and education to drive up productivity.

He said increasing Britain’s ‘stubbornly low’ productivity would be a top priority for the next Conservative government.

Mr Hammond’s intervention came amid growing indications that Labour is planning to revive controversial plans to levy a ‘mansion tax’ on homes worth more than £2 million.

Yesterday it emerged that Shadow Health Secretary Jonathan Ashworth had spoken out in favour of the charge, saying it was something Labour should ‘continue to explore’.

Shadow Chancellor John McDonnell refused to rule out reviving the policy, which could see homeowners charged thousands of pounds a year, regardless of income.

Meanwhile, Labour was accused of hypocrisy over tax avoidance after it blocked Government plans to close loopholes worth £8.6 billion.

In an extraordinary move, Labour’s economic team objected to three key measures in the Government’s Finance Bill that would have made major inroads into tax avoidance.

Tory sources said that, with time running out before Parliament is dissolved for the election next week, ministers had no choice but to shelve the plans or risk losing the legislation that enacts the Budget.

The revelation is embarrassing for Labour, which has claimed it would be much tougher than the Tories on tax avoidance. But the rhetoric appears to have been forgotten this week as senior Labour and Tory figures hammered out a deal on the Finance Bill during the ‘wash-up’ of parliamentary proceedings made necessary by the snap election.

Labour says Parliament did not have enough time to scrutinise the measures, even though the Commons debate on the package ended early. Shadow Treasury chief secretary Peter Dowd defended the decision, saying the anti-tax avoidance measures needed ‘proper debate’.

Britain’s economy grew by a lower-than- expected 0.3 per cent in the first three months of the year amid signs of rising prices hitting consumers in the pocket.

The fall in the pound since the Brexit vote has made imports more costly – pushing inflation up to 2.3 per cent last month – although manufacturers are finding it easier to sell their goods overseas.

Economists had predicted growth of 0.4 per cent for the quarter, but said the slowdown was probably temporary and the inflation rate would fall again.

‘We are a low-tax party’