Boris Johnson rules out early election amid Tory popularity crisis
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Champions of tax cuts within the Government warn that people struggling with the cost of living crisis need more help right away and will be angry if action is delayed until the country goes to the polls.
A Government source said: “The British people aren’t stupid, they’ll remember if we help them out with tax cuts now when they desperately need it, or if we let people suffer for a few years so we can trot them out as a pre-election gimmick.”
Leading figures on both the Left and the Right of the Tory party are pressing the Prime Minister and the Chancellor to ease the tax burden as prices rise at the fastest rate for 40 years.
A second Government source said: “The public aren’t foolish; they know when governments try and wait for things until an election. If tax cuts are good for the economy and good for the cost of living, then they should happen as soon as possible.”
Former Conservative leader Sir Iain Duncan Smith pushed for action, saying: “The reality is we should get on with it now. [There] is no question taxes are too high; they are putting too tight a squeeze on the economy.”
And Damian Green, who served as First Secretary of State under Theresa May, recommended cutting VAT on fuel.
He said: “Tax cuts should be at the heart of a conservative vision of how to protect people from the cost of living crisis, and of restoring growth to the economy. VAT on fuel would be a good place to start.”
The latest figures from the RAC Foundation show that petrol now costs on average 191.43p a litre, of which nearly 45 percent is made up of duty, VAT and environmental taxes and fees.
Sir John Redwood, a leading Thatcherite said: “The government should immediately reduce VAT on fuel. Every time the price of oil, gas and petrol goes up the Treasury rakes in more from VAT and helps boost the impact on inflation.
“As inflation comes down and the economy slows the government should look to cut income tax to make work more worthwhile.”
The British Chambers of Commerce says that a cut in VAT on energy bills to five percent is “crucial” and warned that the economic warning lights are “starting to flash”.
South Thanet Conservative MP Craig Mackinlay said: “We need a dramatic reduction in fuel taxes and environmental levies to get home energy and pump prices down, a cancellation of the corporation tax rise and a reappraisal of the frozen tax bands across personal tax, capital gains and inheritance tax. The Chancellor will be receiving a windfall due to inflation and he needs to take the opportunity to present a bumper giveaway budget in the autumn.
“Giveaways on the eve of a general election simply won’t wash.”
Earlier this year the Office for Budgetary Responsibility said Britain’s “tax burden” is on course to rise to its “highest level since the late 1940s”. Figures published last week show that the number of people paying 40 percent or 45 percent tax has risen by nearly two million since 2019.
Shipley Conservative MP Philip Davies said: “We’ve got the highest burden of taxation on record, which is something a Conservative government should be thoroughly ashamed of. If we’re not going to cut people’s taxes during a cost of living crisis then it makes you wonder when on earth we are going to cut their taxes.
“As far as I’m concerned we should be cutting them substantially, and sooner rather than later.”
The Chancellor has pledged that the basic rate of tax will fall from 20p to 19p before the end of the Parliament, and around 30million people are expected to see their take home rise this month when the threshold for paying national insurance goes up from £9,880 to £12,570.
However, Conservative MPs and right-leaning think tanks are pushing the Government to be much bolder, arguing this will not only aid struggling families but help revive the economy. It is reported that No 10 has proposed a cut in the headline 20 percent rate of VAT but the Treasury is concerned about costs and long-term inflation.
The Treasury is also facing strong calls to ditch plans to increase corporation tax, with rates due to increase next year from 19 percent to 25 percent on profits of more than £250,000.
Former defence minister Mark Francois said: “We cannot tax our way out of the pandemic, we need to grow our way out – and that means reversing the proposed increases in corporation tax, which are only likely to damage business investment into the UK.”
Sam Collins of the Institute of Economic Affairs said that the “only way we are going to get out of the economic hole we are in and cut runaway inflation is by turbocharging growth.”
He said: “If the Government intends to take any action to help the cost of living crisis, it would be significantly less economically harmful in the long term to leave more money in peoples’ wallets instead of increasing state spending.”
John Longworth, a former director-general of the British Chambers of Commerce who today chairs the Independent Business Network, urged the Government to embark on a major programme of tax cuts, saying: “Any political party can bribe the electorate with tax cuts, but to win an election people will need to know that there is strong economic management for the long term. This means creating growth and prosperity now, not jam tomorrow.
“The government must boost business by cutting corporation tax. Cut the cost of living via a cut in fuel duty and boost spending power and incentivise work by cutting income tax.”
John O’Connell, chief executive of the TaxPayers’ Alliance, pressed the Prime Minister not to wait until the next election to slash tax.
He said: “Taxpayers are crying out for some long-awaited tax cuts. With the cost of living crisis already crippling families and firms, waiting until the next election will be too little, too late.”
“Now is the time for Boris to be bold by bringing forward the income tax cut and doubling it.”
Mansfield Conservative MP Ben Bradley, a high profile “red wall” MP, wants the Government to “reduce people’s costs”.
He said: “You don’t encourage growth by taking away people’s disposable income, and you certainly don’t encourage conservative values by tax and spend.”
However, Mel Stride the Conservative chairman of the Treasury select committee, cautioned against early tax cuts.
He said: “We must get taxes down but need to wait until inflation is falling before doing so, or there is the risk of making price rises worse. We should look at tax cuts that help consumers but also provide a much needed boost to business investment, which is really struggling.
“This, however, should not include a reversal of the corporation tax increase, given that – even with the rises – we are competitive internationally.”
A veteran Conservative parliamentarian warned against cutting taxes when the Tories are rocked by sleaze allegations.
He said: “The last thing you should do is try and do it now because it will be perceived as trying to buy off a sex scandal.”
A Treasury spokesman said: “We understand that people are struggling which is why we brought in £37billion of support to help with the cost of living. We’ve also cut taxes by raising [National Insurance] thresholds, which [will] benefit 30million employees with the typical worker saving over £330 a year.
“We’re allowing Universal Credit claimants to keep £1,000 more of what they earn and have made the biggest cut to all fuel duty rates ever.”
Price hikes putting Britain’s business chiefs on red alert
Economic indicators are “flashing red” as firms face increasing inflationary pressures, a leading business group is warning, writes Jon Coates.
The British Chambers of Commerce (BCC) said a survey of 5,700 companies showed that measures for investment and longer-term business confidence have slipped back, hitting investment plans.
Confidence in profitability has taken a “significant knock”, with 28 percent of respondents predicting a decrease in profits.
Declining confidence in performance has affected plans to increase investment, with three in four of those questioned saying they have no plans to do so. And two thirds of firms said they expect their prices to rise in the next three months, a record high, said the BCC. Utility bills, labour costs, fuel and raw materials were said to be driving the rises.
BCC director general Shevaun Haviland, said: “The red lights on our economic dashboard are starting to flash. Nearly every single indicator has seen a deterioration since our last survey in March.
“Business confidence has taken a significant hit and fears over inflation and cost pressures are at new record highs.
“It is not too late for the Government to take action to help businesses.
“A cut in VAT on energy bills to five percent and other steps to relieve the tax burden on firms to encourage investment are crucial.”
High Street crunch as 10,000 independent firms face going bust
Tens of thousands of businesses and jobs could be lost in high streets as the cost-of-living crisis worsens and consumer confidence hits an all-time low, writes Jon Coates.
High street chiefs now fear 10,000 of the UK’s 100,000 independent retailers are at risk of going bust, with another 10,000 of the 140,000 hospitality businesses also facing closure. Soaring inflation, operating costs and falling customer spending are blamed.
Latest official figures show retail sales fell 0.5 percent last month, with consumer confidence levels at a record low.
Andrew Goodacre, chief executive of the British Independent Retailers Association, said: “There is not a positive trend at the moment on the high street.
“Consumer expenditure is definitely down and consumer confidence is at an all-time low.
“If the Government wants to get people to come out to high streets, they have to look at the things that damage consumer confidence, like having to spend £100 on a tank of fuel.
“The cost-of-living crisis is really biting across the board and there is no doubt people’s behaviour is changing. They are changing what they are buying and the frequency of buying.
“Whether young or old, working or middle class, the freedom to spend is being restricted.”
writes Jon Coates.
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The retail chief has been dismayed by a leaked government plan, expected to start running this month, that will see business leaders asked to help beat inflation by cutting prices. The Government’s new cost-of-living tsar David Buttress is thought to have put this forward, arguing retailers can cut prices by reducing spend on marketing. Mr Goodacre said this is a “flawed idea” that could be “divisive” – as it only applies to large retail chains with big marketing budgets.
He said: “This policy also assumes that retailers are adding on all the increases, which is simply not true.
“Supply chain inflation has been ahead of consumer inflation for some time, and as a result independent retailers have been operating on reduced margins by suppressing prices.”
Shoppers snap up cheaper fare
Fresh meat sales at supermarkets fell by 5.5 percent in the past month, while sales of frozen poultry, a cheaper alternative, have risen by 12 percent, writes Jon Coates.
Rice and grain sales have also shot up by 11 percent, with a 10 percent rise in canned beans and pasta, and a 10 percent rise in canned meat, according to data firm NielsenIQ.
Aldi and Lidl are the fastest growing grocers, with a joint market share of 19.1 percent.
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