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The National (Scotland)
The National (Scotland)
National
Steph Brawn

Tax cuts promised by Tory leadership hopefuls are 'not serious', say experts

Tax cuts being pledged by Tory leadership candidates hoping to move in to Number 10 are "not plausible", experts say

EXPERTS have claimed large tax cuts being promised by Conservative leadership candidates are "not serious".

Hopefuls setting out their stalls for Conservative MPs and members this week have focused on pledges to cut the likes of corporation tax, income tax and National Insurance.

But experts from two think tanks have poured cold water on the plans, saying they would require significant spending cuts as well.

Torsten Bell, chief executive of the Resolution Foundation, said that while some “individual” taxes could be cut “at the margins”, the kind of large, wide-ranging cuts being discussed by leadership hopefuls “aren’t plausible”.

He said: “You are not going to be cutting corporation tax by 10 percentage points and cutting National Insurance and income tax.

“The trade-off in terms of slashing public services like the NHS and defence is something politicians are unlikely to be willing to do.”

Carl Emmerson, deputy director of the Institute for Fiscal Studies, agreed tax cuts would also mean spending cuts over the longer term, pointing out that inflation meant the Government already had less room for manoeuvre than when it set out its spending plans in October 2021. 

He said: “When you are setting public sector pay deals, you might find the kind of pay awards that workers might expect – and the kind of awards that pay bodies might recommend – could lead you to decide that it’s difficult to maintain current spending levels, let alone trim them.”

Emmerson added that the situation in Ukraine meant the Government faced extra pressure on its budget after 30 years in which it had been able to cut defence spending in order to fund the NHS.

Almost all the candidates for the Tory leadership have committed to significant tax cuts, with several promising not only to scrap a planned rise in corporation tax to 25%, but to reduce it to 15%.

Emmerson said this would probably bring more investment in the short term but added a corporation tax cut would probably not pay for itself, while cuts to personal taxes such as income tax and national insurance “certainly won’t be paying for themselves”.

He added that while personal tax cuts would put “more money in people’s pockets”, they risked contributing to inflation given ongoing supply problems in the economy.

Both men argued that tax cuts would do little to help boost the economy, Emmerson suggesting they were more about reducing the size of the state, and said longer-term reforms to areas including tax, education and planning would be more effective.

Bell said: “The big picture is that promising tax cuts on this level is not a serious engagement with the questions that the country’s going to be asking in the 2020s and at some point they need to get on to that.”

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