PROMISES of tax cuts from the two Tories aiming to take over as prime minister are “irresponsible fantasy”, the SNP have said, pointing to analysis from a prominent think-tank.
The Institute For Fiscal Studies (IFS) said on Thursday that the UK’s finances were likely to be “weaker” than had been anticipated due to the squeeze from inflation – which has just hit a forty-year high of 10.1%.
The IFS said that permanent tax cuts of the sort being promised by the two Tory MPs hoping to replace Boris Johnson in No 10 would “exacerbate already substantial pressures on the public finances”.
Rishi Sunak, who imposed several tax rises during his time as chancellor, has pledged during the leadership campaign to deliver substantial cuts in the long-term, including cutting the basic rate of tax from 20% to 16% by the end of the next parliament.
Liz Truss, his opponent and the favourite to win, has promised to cut taxes as soon as she becomes prime minister.
However, the think-tank warned that, while cutting expenditure could offset any tax cuts, government spending was instead likely to go up, possibly by tens of billions.
The IFS said increased expenditure would be needed “to continue to support households and to compensate public services for high inflation”. It added: “Additional borrowing in the short term is not necessarily problematic – and indeed may be appropriate to fund targeted support.”
Carl Emmerson (above), a deputy director at the IFS, said: “The reality is that the UK has got poorer ...
“It is hard to square the promises that both Truss and Sunak are making … [with] a presumed desire to manage the nation’s finances responsibly.”
Speaking to the BBC, he added: "These tax cut promises are unrealistic unless they're going to set out detailed, deliverable spending cuts on a comparable scale.
"In reality, there will be a need to spend significantly more, especially given the pressures on households with energy bills."
The SNP said the IFS’s “bombshell” intervention demonstrated that the tax cut promises made by Truss and Sunak are “irresponsible fantasy”.
Kenneth Gibson (below), the SNP MSP who serves as the convenor of Holyrood’s Finance and Public Administration Committee, said: “In their desperation to appeal to the extreme right of the Tory membership, both Sunak and Truss have made promises that are simply undeliverable without plunging the country into an even deeper financial catastrophe.
“While millions of families are already terrified by the horrific cost-of-living crisis – created, let’s not forget, by the Tories – the two people vying to be the next prime minister are engaging in irresponsible fantasy which exposes the chronic dishonesty at the heart of the Conservative party.”
He went on: “After suffering serial liar Boris Johnson and his fantasy Brexit dividends – which have actually cost the country many billions of pounds – the minimum the people of Britain expect is honesty from the next prime minister.
“But both Sunak and Truss seem incapable of telling the truth when it comes to the country’s finances. But then we really should not be surprised – both of them were Cabinet Ministers prepared to perpetuate Johnson’s lies on behalf of their corrupt regime.
“While the Conservatives continue to make false promises, the IFS has confirmed Scottish Government research showing Britain continues to become poorer compared with our European neighbours.”
Gibson’s reference is to the “scene setter” for Scottish independence, published by Nicola Sturgeon’s government in June.
The 72-page document entitled “Wealthier, Happier, Fairer: Why Not Scotland?” looked at 10 “comparator countries” across Europe which it argued “frequently” outperform the UK across a range of areas including wealth, social mobility, income equality, and poverty rates.
Gibson added: “It is yet more evidence that Scotland has been suffering under Westminster control for decades, with higher poverty and inequality levels increasing year by year by year. The only way we can escape is by building a wealthier, fairer and happier future as an independent country.”
Speaking to the PA news agency, a source from the Truss campaign claimed she “would use an emergency budget to kickstart her plan to get our economy growing and put more money into the pockets of hardworking people”.
“Liz will cut taxes using the existing fiscal headroom and will get debt to GDP falling within three years. You cannot tax your way to growth, and business as usual will not do.”
Truss’s tax commitments have been rubbished by Sunak, who claims they will not help pensioners and people on “very low incomes” with rising energy bills.
A Sunak campaign spokesperson said the IFS analysis “drives a coach and horses through Liz’s economic plan”.
They said: “Rishi has consistently made the case that permanent, unfunded tax cuts would cause significant damage to the public finances and push inflation up higher.”
The IFS figures came from an early release of part of new research from the think-tank’s 2022 IFS Green Budget report produced in association with Citi and funded by the Nuffield Foundation.
