There’s nothing idiotic about tax cuts, Rishi

What’s truly stupid is imagining we can continue as we are – with a massive burden of taxation and huge public sector waste

Rishi Sunak didn’t say directly that people who want tax cuts are idiots, but it’s not surprising that some have interpreted it that way.

Asked about the tax burden during a visit to Morecambe on Thursday, the Prime Minister appeared to rule out any tax cuts in the upcoming Budget. “I’m a Conservative,” he said, “I want to cut your taxes ... but the reason we can’t is because of all the reasons you know. You’re not idiots, you know what’s happened. We had a massive pandemic for two years ... Now we’ve got this war going on which is having an enormous impact on inflation and interest rates.”

Mr Sunak’s supporters might contend that this was little more than a statement of the obvious – and that the Prime Minister trusts the public to understand the reasons why his hands are tied.

But what are those of us who do believe that the time is right to reduce the tax burden meant to think? After all, it’s not the first time that the former Winchester head boy has seemed to imply that those who disagree with him on economic policy aren’t just wrong, but perhaps also a bit stupid.

Indeed, that was the tenor of much of Mr Sunak’s Tory leadership campaign last year, when he openly ridiculed so-called Trussonomics. During the first TV debate, he said: “Liz, we have to be honest. Borrowing your way out of inflation isn’t a plan, it’s a fairy tale.” Ms Truss countered, saying: “You cannot tax your way to growth”.

No doubt Mr Sunak feels vindicated by Kwasi Kwarteng and Ms Truss’s swift exit from office after their disastrous mini-budget. But he also cannot ignore that he lost the argument among Tory members over the summer.

And in the same way you would think that only an idiot would travel in a speeding car without wearing a seatbelt, there is something spectacularly politically stupid about allowing Labour to steal the Conservatives’ low-tax thunder, little more than a year from a general election.

Moreover, it is far from idiotic to call for a rethink on the tax burden when there might be some extra room for manoeuvre in the public finances due to the fall in energy prices. Especially when everyone is feeling like they don’t keep enough of what they earn, when more millionaires are emigrating from the

UK than arriving, and when retail sales were down 5.8 per cent, year on year, in December.

No one is advocating unfunded tax cuts, in any case. We have all learnt that lesson from the previous, 44-day administration. But Britain is currently in the quite idiotic position of having disincentivised people from earning more money (or working at all) by taxing them until the pips squeak.

At the very time we desperately need increased productivity and growth, we are not only planning to stifle workers with the highest tax burden since the Second World War, but also slapping more taxes on hard-pressed businesses. Corporation tax is set to rise from 19 to 25 per cent this year, slashing billions off already fragile profit margins at a time when the UK is lagging well behind other OECD countries in attracting inward investment.

The Office for Budget Responsibility says that the November Budget will raise the tax burden to 38 per cent of GDP – up from 33 per cent before the pandemic and the highest since 1945. With people on £50,000, when the 40 per cent tax rate kicks in, saying they feel “poor”, and with those on £100,000-£120,000 paying a marginal tax rate of 60 per cent, it’s fair to say we are paying a “stupid” amount of tax.

Indeed, some of the people advocating tax cuts aren’t even calling for entirely new reductions, but questioning the necessity of proceeding with planned rises that have not yet gone ahead, such as corporation tax in April. How is it idiotic to suggest not going ahead with a tax increase that hasn’t even happened yet?

As Albert Einstein (famously not an idiot) once supposedly said: “Insanity is doing the same thing over and over and expecting different results.”

Yet the Treasury appears intent on sticking to an orthodoxy that has delivered sub-par growth for the past decade and counting. Annual growth, on average, has been 1.3 per cent of GDP over that period rather than the 2.8 per cent achieved between 1950 and the 2007 crash.

On current forecasts, the average salary in 2026 will be lower than it was in real terms not 10, but 20, years earlier. Meanwhile, there are more than five million people on out-ofwork benefits.

So it really isn’t stupid to suggest that maybe, just maybe, the status quo isn’t working – that perhaps some more creative thinking is needed beyond the unambitious, “steady as she goes” mentality that has dominated Britain for decades.

Anyway, if Mr Sunak really thinks we can’t have tax cuts now, then he needs to get better at making that argument – instead of making frankly idiotic comments that were bound to be received badly by some of the Conservative Party’s most loyal supporters.

And how will he adapt if the economic conditions do indeed change materially? The Prime Minister spoke of the “enormous impact on inflation and interest rates” on Thursday – at the very moment that Andrew Bailey, the Governor of the Bank of England, was giving an interview to the Western Mail claiming that the UK has “turned a corner” and that the recession won’t be as bad as we feared.

“It has unfortunately got the characteristic of being long but shallow,” he said of our economic decline, adding: “There is more optimism now that we are sort of going to get through the next year with an easier path there.”

Pledging that inflation would continue to fall, in a boost to homeowners, the Bank of England boss also hinted that the base interest rate will peak at 4.5 per cent.

Surely only an idiot would stick with a punishing course of taxation – one that penalises a great many of your core voters – when it might turn out that that course is actually unnecessary. And you’d have to really think the public are idiots if you imagine that they will put up with almost unprecedented levels of tax when all the evidence suggests that a large amount of taxpayer money is wasted.

Because the other thing that isn’t stupid is questioning idiotic rates of government spending.

It strikes many as completely wrongheaded that there are ever more billions being ploughed into our flailing and failing NHS – without any structural reform whatsoever. A recent analysis found that, despite funding for the health service going up and it employing more doctors and nurses, it was doing fewer treatments than before the pandemic.

Meanwhile, the bill for HS2 has spiralled from £20billion to a stupefying £100billion, despite fewer people actually needing a high speed rail link thanks to the recent shift to home working. And let’s not even get started on Whitehall waste and inefficiencies, which give idiocy a bad name.

As the ex-business secretary, Jacob Rees-mogg (whose former role as government efficiency minister was taken so seriously by Downing Street that it was axed when he left office), pointed out: “The size of the state is too big. We are spending too much and taxing too much. We need to reduce both sides of the balance sheet. We will fall behind other economies if we have the highest taxes around.”

This isn’t an argument for dunces. It’s an argument for Conservatism.

At the very time we desperately need growth, we are also slapping more taxes on businesses