We need tax cuts now that won’t feed inflation

SIR – The economy of the United Kingdom is struggling. It is suffering from high inflation and weakening domestic demand.

The policy solution necessitates a tighter monetary policy from the Bank of England to control inflation and a looser fiscal stance, focused on targeted tax cuts, to address weakening growth.

Thus, timely, targeted and fully affordable tax cuts are needed.

Given the nature of our inflation shock – driven by global supply-side pressures and previously lax monetary policy – targeted tax cuts will not be inflationary. The domestic economy is not overheating.

They are affordable too. At the time of the Spring Statement there was fiscal space that was not used, and since then higher inflation has boosted tax revenues.

There is a need for targeted tax cuts to happen immediately, while further fully affordable measures can be brought forward in a Budget, alongside other options.

Tax cuts are necessary. The United Kingdom is on track for its highest tax burden in 70 years, placing an unbearable strain on households and undermining competitiveness.

Dr Graham Gudgin

Centre For Business Research University of Cambridge

Julian Jessop

Independent economist

Graeme Leach

Chief Economist, Macronomics, Shadow Monetary Policy Committee

Dr Gerard Lyons

Chief Economic Strategist, Netwealth

Douglas Mcwilliams

Executive Deputy Chairman, Centre for Economic & Business Research

Shanker Singham

Chief Executive, Competere Ltd, Academic Fellow, Institute of Economic Affairs

Harry Western

Private economic forecaster