Taxing times at the Conservative Party conferenceby
Will the Tories cut inheritance tax, income tax or corporation tax? Or will they continue to use stealth taxes to pick our pockets? Philip Fisher brings us up to speed on the numerous tax proposals emanating from the Conservative Party conference.
Ahead of what is expected to be the final Conservative Party conference before the next general election, the Chancellor of the Exchequer and prime minister might have hoped to see positive headlines, along the lines of “Manchester United”, praising the party’s tax plans.
Instead, leaks that started as a drip and soon became a flood have made accountants’ favourite topic headline news on a daily, and sometimes hourly, basis.
Before the Tories even got going, the Institute for Fiscal Studies helpfully produced a report stating that during “the biggest tax-raising parliament on record” the overall level of taxation will have increased from 33% to 37% of national income (an extra £3,500 per household) in the past four years and predicted “a decisive and permanent shift to a higher-tax economy”.
No spare cash
The opening salvo for the ruling elite very reasonably came from the man who has his hands on the government purse strings, Chancellor of the Exchequer, Jeremy Hunt.
He rather diffidently but repeatedly told news outlets that there is currently no spare cash available to cut taxes. Instead, Hunt helpfully pointed out that halving inflation would be the best tax measure that anybody can hope for.
A particularly percipient interviewer might have linked this statement to so many stealth taxes, such as freezing income tax personal allowances for five years, the strategy that the Chancellor now appears to have accepted was a focused increase in taxation.
It didn’t take long for a former Chancellor of the Exchequer to push the incumbent out of the headlines with a tactical leak of his own. This was none other than Rishi Sunak, who quietly promoted the idea of reducing the rate of inheritance tax (IHT) by four percentage points. Whether a 36% rate of IHT is that big a government winner seems a moot point. However, he went on to indicate that this might merely be a brief stopping point on the road to full abolition.
This column looked at Britain’s most hated tax last week and, if it hasn’t been abolished in the meantime, will return to consider the topic in greater detail before the end of the month.
You imagine that when the holders of the two offices of state that have sway over tax matters have spoken, silence would prevail. That is far from the case.
When it comes to tax matters, Sunak’s control of his party appears to be akin to one of his favourite helicopters after the motor stops running in midair.
In no particular order, there have been at least three significant contributions from those who are concerned that the party is heading in the wrong direction.
The leader of the opposition, Liz Truss (eat your heart out Sir Keir Starmer and Boris Johnson) held her own rally at the party conference.
The forgotten woman, who trashed the economy in a single month last year, seems determined to repeat the trick. Her primary demand is for corporation tax to return from 25% to 19% and then get cut even further. To be fair to the lady, given a large enough scattergun, she would probably go on to abolish taxation completely, at least for the mega rich, in the sure knowledge that this would fire up the economy.
At roughly the same time, a group of 30 Conservative MPs, including Truss, former Home Secretary Priti Patel, former party chairman Jake Berry and some other big hitters such as Jacob Rees-Mogg have said they will not support any government motion that increases taxes.
One wonders whether this includes stealth taxes? If so, we are about to see tax cuts (or increases in thresholds) totalling close to 10% to take into account inflation over the last year.
Apparently, now that the conference is up and running, that revolting group has expanded to 60 and been christened the Conservative Growth Group.
Anyone with a memory span that stretches a year will realise that the only things likely to grow from such measures are monthly mortgage repayments and party dissension.
That would be enough for most discordant political parties but dear Michael Gove had to have his say as well. In this context, he promoted ideas on Sky News that sound dangerously like sanity.
He wants to reduce taxes on work, hinting that the main villains were income tax and national insurance contributions. The obvious route would be to increase exemptions and allowances, thus helping at the bottom of the pile. While such ideas might make Gove a pariah in the Conservative Party, they could be drawn directly from a Labour or Lib Dem manifesto.
At the moment, it is impossible to know who will win this internecine war but the biggest beneficiaries might just be the Labour Party, whose views on tax issues should become clearer during their own conference in Liverpool next week.