If Sunak wants to be PM, he should cut taxes

The country is at its limit. Recovery and political success depend on ending this tax-and-spend regime

Conservative Home’s recent Next Tory Leader poll was good news for Rishi Sunak. The Chancellor came top, with more than twice the support of Liz Truss, the runner-up.

This isn’t an outlier: “Dishy Rishi” ended 2020 as the most popular politician in the country. He’s splashed billions, protected millions of jobs, and cultivated a slick social media presence. But now he must claw us out of the economic black hole left by the virus. In June, Sunak described himself as a “fiscal conservative… it’s not my money, it’s other people’s money and I take my responsibility for that very seriously”. The Prime

Minister has no such scruples. Few would describe the Johnson administration as “conservative”, if we take that to mean supporting free markets, low taxes or small government. The five-year average tax burden is at a 70-year high. Though Covid has wrecked the public finances, the PM is splashing taxpayer cash like a spendthrift on pay day.

And while Johnson will preside over the biggest GDP surge in several decades – the inevitable rebound from having plunged the economy into the deep freeze – this recession will come with a sting in the tail. The Bank of England is warning of a longer spell of inflation which, if it becomes a chronic problem, will lead to higher interest rates and a downward spiral. By 2023, growth could be just 1.6 per cent. That same year, corporation tax increases will kick in. The personal allowance freeze will be taking its toll.

The Chancellor cannot wait until the going gets tougher to articulate his vision. The early signs are encouraging: he blocked a £15billion catch-up plan for schools and rejected a permanent £20 uplift in Universal Credit. He called on the Government to create freeports – which will do vastly more to transform the economic prospects for left-behind Britain than money alone. At various stages during the pandemic, Sunak has been a lone voice insisting that freedom be the default and urging Brits to live “without fear”. He told MPs that if they voted to restore the foreign aid cut there would be “likely consequences for the fiscal situation, including for taxation and current public spending plans”. In doing so, he acquired a new political weapon – a Tory Commons majority against tax rises – against those pushing for spending increases.

Then again, the Chancellor agreed with the US on creating a global tax cartel. He is reportedly looking at increasing various forms of wealth taxes, including the widely loathed inheritance tax, and hiking National Insurance to fund social care. These flirtations must end: Treasury officials should stop casting around for more ways to increase the tax burden and instead look for ways to cut it.

The Tories cannot do socialism better than the socialists. Now is the time for Sunak to unapologetically and radically reform the UK’s tax system – a move that will gain favour not just among traditional supporters but the new voter base, too. Polling from just before the 2019 election told us the new blue-collar Conservatives want to see their taxes go down.

Punitive taxes, whatever populists like to claim, never fall on just the rich or on businesses, but on workers, consumers, renters and homeowners. Hikes are not only immoral after months of hardship, but they’re near-impossible given that we are at – or close to – our taxable limit. There is little more that can be squeezed out of the private sector and, for some taxes, we may already be on the wrong side of the Laffer curve.

If we are serious about creating a robust post-Covid bounceback, we need to abandon tax-and-spend, pursue economic liberalism, and allow the market to create jobs. Churchill noted that “for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”. Ditching the pail may not guarantee Sunak the top job, but a swift economic recovery depends on it.