Cut taxes NOW to prevent recession
Gove joins chorus of calls for PM to take immediate action
BORIS Johnson is facing fresh calls to cut taxes after the economy shrank again in April.
The Prime Minister is battling a growing backlash from backbenchers, business leaders and even members of the Cabinet, who worry that the UK’s soaring tax burden is adding to the cost of living crisis.
Michael Gove said reducing the tax burden would help ‘level up’ the country and increase investment.
‘If you have a measure of fiscal devolution, sooner or later – ideally sooner – people recognise if you want to stimulate economic activity, that you reduce taxes,’ the Levelling Up Secretary told MPs.
Mr Johnson claimed yesterday that ‘we’re bringing in tax cuts as fast as we can’. But, as data from the Office for National Statistics showed output contracted by 0.3 per cent in April, following a 0.1 per cent fall in March, experts urged Mr Johnson to help businesses and households to avoid a recession.
Gerard Lyons – chief economic strategist at wealth manager Netwealth, and a former adviser to Mr Johnson during his time as mayor of London – pushed the Government to reduce workers’ income tax bills.
Mr Lyons said: ‘The Government has to – and it’s already started – ease fiscal policy. Easing fiscal policy does mean tax cuts – it means appropriate tax cuts. Near-term it means trying to either halt or temporarily suspend taxes on fuel or energy. But as we move through the year, I think it will have to be an income tax cut to get money into people’s pockets.
‘And next spring I think it should be a suspension of the planned increase in corporation tax.’ Corporation tax is due to rise from 19 per cent to 25 per cent next year in a move which many business owners have said could cripple their firms.
Speaking on LBC radio yesterday, Mr Johnson said: ‘We’re bringing in tax cuts as fast as we can, but what we’ve also got to do is look after people in a tough time. There’s an inflationary spike that we’ve got to get through right now.’
April’s 0.3 per cent slump in activity was worse than the 0.1 per cent growth economists had pencilled in. Output was lower across all three major sectors – construction, manufacturing and services.
The slowdown in growth will also cause a headache for the Bank of England, which is due to release the latest conclusions of its monetary policy committee on Thursday. The nine-strong committee sets the Bank’s base interest rate, and is expected to bump it up from 1 per cent to 1.25 per cent as it battles red-hot inflation.
Mr Gove said the US city of Nashville was ‘booming’ because state bosses had gone for a ‘lowtax approach which has seen talent flow in’. Using Tees Valley in the North East as an example, the minister said if district mayor Ben Houchen was given the freedom to set taxes, ‘it would undoubtedly be the case that Redcar would become the Nashville of England’.
Tory MP Andrew Griffith said next month’s increase in the amount workers can earn before paying national insurance was the first step in the Government’s ‘biggest tax cut for a decade’, and suggested there was more to come.
Writing for ConservativeHome, he added: ‘It is very clear tax cuts are now a “When”, not an “If”.’