Rishi Sunak: What to expect from budget with Victoria Scholar
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The former Brexit Secretary claimed “every indication” of Mr Sunak’s budget “will take us onto the rocks – not away from them”. Despite Mr Sunak reportedly being a fan of his Margaret Thatcher predecessor, Nigel Lawson, Mr Davis said the Chancellor was making “a most un-Thatcherite choice to persevere with raising taxes as the solution to ballooning Government debt”.
Mr Sunak is set to deliver his autumn budget this coming week, as the UK faces crises on several fronts, many spurred on by the coronavirus pandemic.
Not only is the NHS again at risk from coming under intense pressure during the winter, shortages threaten supplies of energy, petrol and food.
Meanwhile, Mr Sunak has said the Government must begin paying down the debt accrued through public spending during the pandemic.
The spending it has already committed to has seen the Government propose to raise National Insurance.
Mr Davis noted the UK was “facing its worst winter crisis for more than 40 years” and “no one disagrees that the enormous scale of post-pandemic Government debt requires radical action.”
However, the “tax burden is already at a level not seen since the 1940s”, he said, and so “raising taxes is not the answer.”
Speaking to the Mail on Sunday Mr Davis added: “Increasing that burden will simply inflict more damage on the economy and lead to lower tax receipts.
“No, the way to deal with such debt levels is to do exactly what we did after the war – issue the modern-day equivalent of ‘war bonds’, to be repaid over 50 years or more.
“Of course, we should have done this already, before inflation and interest rate expectations started to rise.
“Once we have dealt with the debt, we can set about balancing the books, but by tax cuts – not tax increases. Taxes are harmful to the economy.
“Together, high taxes and high inflation create a growing spectre that threatens our post-pandemic recovery.”
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The MP for Haltemprice and Howden pointed to Bank of England predictions that inflation could rise to 5 percent within the next year, and suggestions that it will imminently raise the base interest rate above 0.1 percent – the lowest it has ever dropped, which the Bank did to support the economy during the pandemic.
He said: “The Chancellor estimates that a one percentage point rise [in interest] will cost the Treasury £25 billion annually – double the cost of the new Social Care Levy.”
Mr Davis added that “with people paying more for food, more for fuel, and more for their bills, they have less money to spend elsewhere, slowing economic growth more broadly.”
The former Brexit Secretary also hit out at plans to raise corporation tax from 19 to 25 percent, saying they will “lead to less investment”.
Mr Sunak was “should incentivise businesses to thrive, not stifle them with eye-watering tax levels that have reached 36 per cent of national output.
“If we want higher wages, we need higher productivity, which in turn means higher investment.
“Corporation tax increases will lead to less investment, not more.
“Without creating a dynamic and business-friendly economy, we cannot attract companies creating the jobs of the future or capitalise on the benefits Brexit brings.”
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