Sunak’s tax plans spark panic among UK Tories fearing backlash from voters

[ad_1]

The new Prime Minister seeks to plug the hole in the UK’s finances with an economic plan that runs counter to his Conservative party’s low-tax philosophy

Content of the article

(Bloomberg) – Britain’s Rishi Sunak Tories are in shock this week.

Advertisement 2

Content of the article

But it’s not the bullying scandal that forced Gavin Williamson out of the new prime minister’s office after just two weeks that Tory MPs are concerned about. Rather, it’s a different set of headlines about major tax hikes Sunak and Chancellor of the Exchequer Jeremy Hunt are weighing to help plug a £35bn ($41bn) tax hole .

Content of the article

Reports that they are seeking to raise more money through income tax, windfall charges on energy companies and inheritance levies have sown panic and skepticism across the Tory party, dominating conversations in the paneled tea room of the House of Commons where British lawmakers meet daily for a gossip and a brew.

The gloomy mood was evident in conversations with several Tory MPs, ministers, aides and civil servants this week.

Advertisement 3

Content of the article

The party elected leader Sunak to restore calm after Liz Truss’ calamitous seven weeks in office sparked chaos in financial markets. But while Truss had promised a low-tax Tory nirvana, his successor appears to be heading the other way as he and Hunt prepare to unveil a fall statement — a budget in all but name — the November 17.

Not only do the two men want to close the gaping gap in the nation’s finances; they are looking for a buffer in case things get worse, meaning spending cuts and tax hikes could reach £50billion or more.

Grim media reports of what Hunt plans to do have leaked daily, with the Treasury failing to reverse them. Measures under consideration include increasing capital gains tax, reducing the tax allowance for dividend income and allowing local authorities to raise more tax money. dwelling.

Advertisement 4

Content of the article

Some MPs are pressuring Sunak and Hunt to soften their proposals, warning they could not vote for some of the ideas put forward. It is a reminder that Sunak’s policies depend on the support of his MPs, and illustrates the collapse of the government’s system of “flagellation”, through which he enforces party discipline. Although not a whip, Williamson was a key enforcer for Sunak.

kites

In a sign the Prime Minister is listening – but not necessarily making promises – several Tories have described being ‘blue ticked’ by Sunak over the past few days: messaging him on WhatsApp, seeing he’s come online and read it, before logging out without responding.

Many conservatives believe that some of the tax hikes being discussed are kites flown by government advisers to set expectations for the declaration so low that eventual announcements don’t look so bad. This is a tactic regularly deployed by Sunak when he was chancellor.

Advertisement 5

Content of the article

Of most concern to Tory MPs is the suggestion that the top rate of income tax could be raised to 50%, a level not seen since the days of former Labor Prime Minister Gordon Brown, and a breach of promises party elections in 2019.

Several MPs told Bloomberg they did not believe the proposal was genuine, saying that when colleagues complained about the contents of the eventual budget, Hunt would be able to say it could have been worse. One said if he continued there would be no reason to vote Conservative over Labor in the next election.

Stealth taxes

Even if the tax rate is not hit, officials said Hunt could lower the threshold at which he is paid. He is also considering extending the freeze on other income tax thresholds, pushing millions into higher tax brackets thanks to soaring inflation. This so-called ‘fiscal drag’ is a massive stealth tax that Tories should oppose, one MP has said.

Advertising 6

Content of the article

Another levy in the chancellor’s sights is inheritance tax, officials say. Traditionally, the Conservative Party has accused its Labor opponents of wanting to raise ‘death taxes’. But Hunt plans to freeze the rate at which the tax begins to be paid – effectively raising the tax with inflation over 10%.

That would be unthinkable for Tories heading into an election, another MP warned. This week’s papers read like a Tory suicide note, they said, recalling a brutally effective 1992 Tory poster campaign using a photo of a bombshell with the words ‘labour tax bomb’. Their opponents could reroll it and use it against them, the lawmaker said.

Business-minded Tory MPs are also unimpressed by the idea that Hunt could extend a windfall tax on oil and gas companies by cutting the savings of companies investing in domestic extraction. The incentive was a key part of the tax, and cutting it would hurt Britain’s energy security, said a former minister involved in its planning.

Advertising 7

Content of the article

« Bring Back the Lettuce »

The government is also set to announce the outcome of its consultation on an online sales tax, with one official saying it is being seriously considered. Business lobbyists say it would make a recession worse.

A budget made up of stealth tax increases and delayed spending cuts might be presented as placing the heaviest burden on those with the broadest shoulders, but draw the line between keeping markets calm and convincing voters that conservatives do not preside over economic carnage is a challenge that could define Sunak’s premiership.

Most Tory MPs agree the wealthiest should pay the most, but their fears center on tax hikes compounding the pain felt by middle-class voters hammered by higher energy and mortgage bills.

During Prime Minister’s Questions in the Commons on Wednesday, a Labor MP called out to Sunak: « Bring back the lettuce », in reference to an unflattering description of Truss in a tabloid. The concern of Tory MPs now is that while Truss’ sweeping tax cuts were unpalatable to markets, there is a risk that his successor will go too far in the other direction and put off Tory voters.

Advertising

comments

Postmedia is committed to maintaining a lively yet civil discussion forum and encourages all readers to share their views on our articles. Comments can take up to an hour to be moderated before appearing on the site. We ask that you keep your comments relevant and respectful. We have enabled email notifications. You will now receive an email if you receive a reply to your comment, if there is an update to a comment thread you follow, or if a user follows you comments. See our Community Guidelines for more information and details on how to adjust your email settings.

[ad_2]

financialpost

Back to top button