Increases in national insurance contributions and corporation tax are undermining the Conservative Party’s tax cutting agendas, a former Cabinet minister has claimed.
As MPs returned to the House of Commons for the third day of Budget debate, a handful of Tory MPs did not hide their discontent with the shift to a big state and high taxes.
Dr Liam Fox insisted that while “there may be some in the current Government who take a more social democratic approach to economic management”, he did not come into Parliament as a Conservative “to see the state grow at the expense of the private sector”.
The former secretary of state for international trade said: “I think that we need to remember what has given Britain the substantial strength economically it’s had.”
He added: “I have to say the increases in National Insurance and corporation tax will take, as a proportion of GDP, Britain to 36.5%, the highest in 70 years undermining the tax cutting agendas that we have had in office for such a long time.”
Conservative Stephen Hammond (Wimbledon) also warned the Government not to “become boxed in between the false choice of higher taxes and higher debt”.
He said: “It’s key, therefore, that the Government does not in its quest to work out how to pay for investment become boxed in between the false choice of higher taxes and higher debt.
“Higher debt leaves the economy open to the ravages of inflation and higher interest rate costs which only hit the poorest in our society.”
While Conservative former minister John Penrose praised Chancellor Rishi Sunak for the changes to the taper rate announced in last week’s Budget, he urged the Government to go further towards a Nigel Lawson-esque kind of tax system, which would see all income taxed equally.
He told MPs: “One of the people who I admire most in the Conservative Party’s long and illustrious history is Nigel Lawson and he said when he cut top rates of tax from somewhere in the 90% down to 40% or 45%, he said ‘look there is a point here about work incentives, you cannot expect people to work their socks off and then have the Government swipe it all because the Government believes it can spend the money better than they can’.
“He was right. The point is, of course, that if he is right for the best paid, for the most well-off, he must also be right for the least well-off , too. And therefore, the effect on work incentives for this particular tax cut, this reduction in the taper rate for Universal Credit, is particularly welcomed because of the effect it is going to have on the work incentives of the least well-off in our country.”
Mr Penrose noted he hopes the Government will be looking at the effects of other taxes.
He added: “As a result, I believe this is a vital step in what I hope will be the beginning of a long journey to head us towards a Nigel Lawson-esque kind of tax system, which will say it should not matter whether or not you are getting money from your earning, unearned income or from benefits, they should all be treated the same as income.”