Reluctant Chancellor urged to lower tax burden by ministers
Firms ask for more help from the Government amid concern Britain is heading towards downturn
CABINET ministers yesterday pressed Rishi Sunak to lower taxes as the Chancellor used a speech to promise future cuts for businesses.
Liz Truss, the Foreign Secretary, and Alister Jack, the Scottish Secretary, lobbied for new tax cuts as they discussed the cost of living crisis. Ms Truss called for a “low-tax economy” in an interview on BBC Radio 4’s Today programme.
She initially prevaricated when asked if she backed the rise in National Insurance contributions.
Mr Jack told ITV News’s Border show: “What more I’d like to see done is a further tax cut because that’s how you get money into people’s pockets.”
The public interventions hint at the strength of support in Cabinet for tax cuts as Mr Sunak juggles with the competing demands of soaring inflation and stuttering economic growth. He used a speech at a Confederation of British Industry event to indicate that business tax cuts were coming – but made no such promise over personal taxation.
The clamour for earlier intervention continues to build, including on the Conservative benches, with one MP saying a cost of living “tsunami” was coming. However, No10 is resisting demands for a windfall tax on energy firms, with one of Boris Johnson’s advisers describing it as “ideologically unconservative”, according to The Times.
Mr Sunak told the CBI last night: “We need you to invest more, train more, and innovate more. And as I’ve said previously, our firm plan is to reduce and reform your taxes to encourage you to do all those things.”
The Daily Telegraph has learnt that a key element of Mr Sunak’s flagship support package to combat rising energy prices is facing sharp criticism from Government figures working on it.
He has announced that all households will be eligible for a £200 discount on their energy bills, to be repaid in £40 instalments in future years, under his energy bills support scheme.
Some Tory MPS have been lobbying against it, arguing that some of their constituents have said they do not want a “loan” – Labour’s description of the policy. A senior Treasury source dismissed claims that the scheme, due to start this autumn, could be abandoned.
Ms Truss, one of only a handful of Cabinet ministers to privately oppose the National Insurance rise when it was proposed, has indicated that she opposes a windfall tax on oil and gas companies, telling Radio 4’s Today: “A low-tax economy helps deliver … jobs.”
RISHI SUNAK last night vowed to cut taxes on business as the British economy teeters on the brink of recession in the face of the cost-of-living crisis.
In a speech, the Chancellor urged companies to increase spending to prevent a sharp downturn and pledged to slash the tax burden to help them do so.
However, a specific reference to business tax cuts in the autumn Budget appeared to have been removed from the address shortly before it was delivered at the annual dinner of the Confederation of British Industry.
Speaking to business leaders, Mr Sunak said: “We need you to invest more, train more, and innovate more.
“And as I’ve said previously, our firm plan is to reduce and reform your taxes to encourage you to do all those things.”
An earlier briefing on his comments circulated by the Treasury had included the line: “In the autumn Budget, we will cut your taxes to encourage you to do all those things.”
The reason for the change was not clear last night.
Mr Sunak’s vow to cut the tax burden will none the less be seen as an effort to build bridges with big business after years of disagreements over Brexit.
The Chancellor raised hackles further in March last year when he announced plans to increase corporation tax from 19p to 25p in April 2023 to raise £17bn annually. He is also reportedly considering plans for a windfall tax on the oil and gas industry.
Mr Sunak’s one major concession to the corporate world has been the socalled super-deduction, which allows companies to cut their tax bill by up to 25p for every £1 they invest in equipment. This is due to expire next year and the Treasury is consulting on options to replace it, including a permanent tax break for plant and machinery which is expected to cost up to £11bn.
The Government said it is interested in hearing opinions on whether this would be the best way to spend these funds.
Craig Beaumont, chief of external affairs at the Federation of Small Businesses, said: “With GDP shrinking, inflation rising and the cost of doing business at a record high – we need to see more from this Government to avoid recession and reverse the 400,000 decline in small UK small businesses.
“Helping with energy bills by matching council tax help with business rates, would be a good start. Reducing the cost of Government and the highest tax burden since Clement Attlee, would mean small businesses could then invest, retrain and innovate.”
Boris Johnson’s Government is keen to boost productivity and growth in the economy as a long-term solution toward helping people cope with the highest inflation in 40 years.
Mr Sunak offered little new in the way of immediate solutions for those struggling to pay daily bills. He argued that creating better-paying jobs is the best way to shield the public from shocks to the economy.
The Chancellor and Mr Johnson have been reluctant to announce extra direct support to ease the squeeze on living standards for fear of further fuelling inflation. However, Mr Sunak sought to cast himself as the “crisis Chancellor” and added that tackling the cost of living squeeze was not just an economic necessity but a “social and moral necessity”.
He said: “Those who suffer the most are not the wealthiest who can find ways to protect themselves, it’s always the poor.” He added that the Government is “ready to do more” to help the most vulnerable.
UK business investment is currently at 9.1pc below its pre-pandemic levels, according to the Office for National Statistics. Tony Danker, director-general of the CBI, said stimulating investment is a priority to avoid an economic slump. “It will ensure that any firm pausing an investment now will be bold, decisive and back their original plans,” he said.
The CBI earlier this year said that making the super-deduction permanent could boost UK business investment by up to £40bn a year by 2026. According to OECD data, UK businesses only invest 10pc of GDP every year, against 14pc in rival countries.