Phillip Hammond has strongly hinted that Britain could be in store for some tax rises, and if so, they will be announced in his Budget next month. The tax rises will be in a bid to ease what is now years of austerity.
In his defence, Mr Hammond said that the Conservatives never stated that they would not raise “some taxes”. He also appeared on BBC Radio 4 in October where he was asked about whether he will raise the current tax rate, so he can implement popular moves such as raising state employees’ wages and reducing tuition fee interest rates. Mr Hammond’s response was that “we believe in keeping taxes low and fair”.
Further, in an interview on BBC1’s Andrew Marr programme, Mr Hammond didn’t explicitly rule out not raising taxes, as he insisted borrowing more is “not the solution”.
It’s useful to remember that the Conservative Manifesto actually got rid of the “triple lock”, which guaranteed there would be no increases in National Insurance rates, VAT rates or income tax rates. They replaced the “triple lock” with a “general statement of intent” to lower tax and simplify the tax system. This weakening further points to the openness and willingness of the Conservatives to hike tax rates.
Some independent forecasts have shown that by the end of this decade the tax burden, which is the amount of the countries income which is taken from tax receipts will reach the highest level it has in thirty years. As a point of interest, at the moment it stands at approximately 34% of GDP. There has understandably been a strong outcry and strong opposition to the proposed tax increases that Mr Hammond has recently been alluding to.
Mark Littlewood, the Director General of the Institute of Economic Affairs stated clearly that “hiking taxes further instead of continuing to make savings is extremely misguided.”
John O’Connell, Chief Executive of the TaxPayers’ Alliance, added that “such a short-sighted reaction of raising tax to fund politically expedient policies will be terrible for jobs and economic growth”. His argument is that “corporation tax cuts (and) low taxes can generate greater revenues, with more money becoming available for essential public spending”.
On the topic of the potential tax increases Mr Hammond has said “”I have the courage to do what’s necessary to support the British economy”. However, what he and the Conservative party think is best for the economy and what a large proportion of the general British public do are at great odds with each other. So, we can expect a lot of tension if the tax increases are introduced to the extent to which Mr Hammond and the Conservative party hint that they would be.