The Government risks inflicting further damage on Britain’s already-battered economy if it resorts to tax increases to cover the costs of dealing with the pandemic, MP Ian Liddell-Grainger has warned.
He says the economy needs to be shifted up a gear with the use of tax breaks and incentives, while an increased tax take promised nothing more than a sustained recession.
Ministers are reportedly planning wide-ranging tax increases in the Budget to help claw back some of the enormous sums – anywhere from £263bn to £391bn, according to the Office for Budget Responsibility – the government has spent dealing with the pandemic and its fall-out.
Chancellor Rishi Sunak is drawing up plans to raise £30 billion, with increases in corporation tax and capital gains tax in his sights together with an end to the pension triple lock guarantee and cuts in foreign aid. But Mr Liddell-Grainger, Conservative member for Bridgwater and West Somerset, said the effects on the economy would be little short of disastrous.
“History shows clearly that if you want the economy to get back on its feet you don’t increase the tax burden, you reduce it,” he said.
“The more you tax people the less they have to spend, the more the economy stagnates and the less activity there is to tax.
“The right course is to use tax breaks to stimulate growth and increase prosperity and only when you have achieved that should you start thinking about a higher tax take.
“This has been a very difficult and challenging year for taxpayers but most have willingly gone along with all the restrictions that have been imposed in the belief that they will eventually steer us all back to somewhat happier times. It will be a major psychological blow for millions of people to learn that their only reward for enduring months of deprivation of various kinds is an increase in tax.”
Mr Liddell-Grainger said the tourism sector in particular had benefitted from various Government support schemes during and after lockdown and ministers should be looking at ways to continue supporting business activity f
“To borrow Churchill’s phrase the stage we are at is not so much the beginning of the end as the end of the beginning. It is still far too early to be looking to taxation to recover our costs, and while interest rates remain where they are there is no particular urgency to do so,” he said.
“Locally we should be encouraging taxpayers to spend and helping businesses to return to something like normal trading. Nationally we should be throwing open our doors and offering generous incentives for inward investment as we emerge from the EU.
“Putting a brake on everything through higher taxes is only going to lead to another lockdown: a lockdown into a prolonged and highly damaging recession.”