The worst time to be increasing taxes
Economic growth in July was a paltry 0.1 per cent. The return of outdoor events helped, as did a boost in oil and gas. But the economic recovery was suppressed by the “pingdemic” that forced workers to stay at home – a warning of the dangers of dragging out Covid measures, like test and trace, longer than is strictly necessary.
However, growth was already far from spectacular before July, and the economy is still 2.1 per cent smaller than its pre-pandemic peak. Ministers have relied on the assumption that what goes down must come up, that Britain will naturally bounce back from last year’s historic slump. They lack a growth strategy (be it tax cuts or investment) to help, and without a clear sense of direction on Covid – in particular, ruling out another lockdown – businesses continue to operate in an environment of debilitating uncertainty.
Supply chain problems are acute and there is a chronic shortage of HGV drivers. Furlough, which is still supporting over a million people, is about to end. Coming to Britain has become an expensive and complicated matter. Despite our vaccine success, we do not give the impression of being open for business, let alone “global”.
There is never a good time to raise taxes. This must be among the very worst. Yet the Government has decided to squeeze businesses and workers. National Insurance for employers and employees will rise, as will tax on dividends. Corporation tax was already slated to jump six percentage points. Tax as a share of the economy will hit its highest level in decades.
Policy is being driven by electoral calculation rather than philosophy or common sense, and what might seem superficially clever to No10 – such as stealing Labour’s clothes on the NHS and social care – could, in the long term, be utterly self-defeating. With inflation rising, the economic picture come the winter might well be a combination of unemployment and rising prices, particularly on energy, which will hit the very Red Wall voters Boris Johnson is determined to hold on to.
It is no surprise that so many Tory dissidents are found in the ranks of MPS elected from that part of the country. They know their constituents did not vote for socialism, either its policies or its historic record of economic failure.