You can’t tax your way to growth, Truss supporters tell Chancellor

A BACKLASH has intensified over the Autumn Statement as two former members of Liz Truss’s Cabinet warned Jeremy Hunt he could not tax his way to growth.

The Chancellor confirmed increases of £24billion as he and Rishi Sunak insisted “difficult decisions” were needed to fill a black hole in the national finances. But the measures have fuelled concern among MPS who supported Ms Truss’s low-tax policies.

Kit Malthouse, the education secretary under Ms Truss, warned Mr Hunt’s tax increases may lead to a longer period of inflation as workers were “likely” to demand pay rises from their employers. He warned: “That has a possibility, I am afraid, of sparking a wage and price spiral, particularly as we know the secondary effects of this inflation will take some time to work their way through the system – possibly months, if not years.”

Mr Malthouse went on to warn Mr Hunt “we are not going to tax our way to prosperity” and said economic growth was “the only way we are going to get out of this”. He added: “We need to inject growth into our economy and the only way we can do that is by letting those wealth creators free, by loosening the ties that bind them, by looking at the regulation and indeed the taxation on capital in particular so that people are willing to take risks.”

Wendy Morton, Ms Truss’s former chief whip, acknowledged tough decisions had to be made in the wake of Russia’s invasion of Ukraine and the fallout from the pandemic.

But she added: “Taxes from fuel, freezing the National Insurance contributions threshold and the dividend tax changes – and, dare I say it, raiding the [research and development] tax credit scheme – don’t do much to encourage businesses and the many hardworking owners of small companies, who work hard just to keep their businesses going and to keep them growing.”

James Cartlidge, the Treasury minister, told MPS inflation was “the ultimate tax” as he refused to commit to cutting the 20p tax rate – one of Mr Sunak’s flagship leadership campaign promises in the summer.