Kickstarting the recovery
BY ETHAN THOBURN
Recently, Chancellor Rishi Sunak outlined Britain’s post Coronavirus economic plan in his summer statement. This included a massive package of government support, such as a 15pc VAT cut in the leisure and tourism industry plus the ‘eat out to help out’ scheme, incentivising people to dine in restaurants. But Mr. Sunak needs to go further than this in his autumn economic update.
The government has already spent in excess of £300bn on lockdown and supporting the economy during the COVID pandemic; however, our approach to the rebuild is just as important and, as I suggested a few weeks ago for this site, he should formulate a plan inspired by the ideas of Thatcherism, Reaganomics, and Roosevelt’s New Deal.
There have been mixed reports about what Sunak and his Treasury team will dish up. Tax rises – though popular with Labour and, it seems, in polls – would be a mistake. It is essential that he resists the Siren calls of the left and cuts taxes, thereby stimulating demand; more people will be better off and have more autonomy over their own money and how they spend it.
As we’ve seen historically, both in Britain and the USA, tax cuts have kickstarted and reignited the economy, dragging it out of deep recession into boom. Just look at Mrs Thatcher’s tax cuts in the early 1980s: by the time 1986 came around, Britain was officially ‘booming’, President Reagan, across the pond, had similar results following his election in 1980; John F. Kennedy cut federal taxes when he was elected in 1961, continuing the cuts made by Eisenhower in the 1950s, super-charging the American economy post-War.
It’s not just VAT in the leisure and hospitality industry which we need to cut; VAT holidays for small businesses would have a massive impact and be a fantastic way of saying thank you to all those small businesses, most of which are family owned, which have kept us going during this crisis.
Secondly, Rishi Sunak should be looking at cutting income tax in his October statement. This would be massively beneficial to small businesses, and workers. He should start at the top, lowering the higher rate of income tax from 45pc to 40pc, which is where the current middle band sits at; consequently, the middle band should be reduced to 33pc. However, it shouldn’t stop there, everyone should be a beneficiary of these cuts, and I would recommend lowering the base rate of income tax from 20pc to 15pc, as well as raising the personal allowance from £12,500 p/a to £15,000.
Additionally, the increase of the national insurance threshold from £9,500 per year to £12,500 would significantly benefit workers on low incomes, thereby looking after all levels of income in our society.
A bumper package of tax cuts and free market policies would help Britain boom after this COVID pandemic. I would also like to see the permanent abolition of stamp duty, rather than the temporary six month suspension of it as the Chancellor announced on Wednesday. Stamp duty is an outdated tax which we don’t need and should be completely abolished rather than continually reformed, an insidious trend started by then Chancellor George Osborne in 2014.
By returning to first principles, the Conservatives can ensure this country recovers as quickly and efficiently as possible from the pandemic. It really is time to Kickstart Britain.
Ethan Thoburn is Chairman of South Tyneside Conservatives and an Area Officer in the North East of England. He is Editor of The Bruges Group. Follow him on twitter: @ethan_thoburn