Tory leadership candidates' 'tax cutting auction' branded absurd by senior economist

·3-min read
Members of the public walk along the shaded side of Oxford Street, central London, as they enjoy the warm weather. Picture date: Thursday June 16, 2022.
Former Financial Services Authority chair Lord Adair Turner said that higher and not lower taxation is necessary in the current economic climate. (PA Images)

A top economist has branded Tory leadership hopefuls' race to promise vast tax cuts "absurd" in the face of the UK's current economic challenges.

The UK tax burden is currently at its highest level in 50 years as the UK exits the pandemic and grapples with soaring inflation and rising energy bills.

Slashing taxes has become a key dividing line in the race to be the next PM, with Rishi Sunak alone in not promise immediate reductions.

One candidate, former health secretary Jeremy Hunt, on Monday suggested that he would look at cutting "all taxes".

Read more: Tory leadership candidates promising tax cuts to fix cost of living crisis have 'lost touch with reality'

Speaking on Wednesday, Lord Adair Turner, former chair of the Financial Services Authority (FSA), has said higher - and not lower - taxation is necessary.

"I think we have to take head on the debate that, not only should we be rejecting this absurd auction of tax cuts at the moment, but [accept] maybe a somewhat higher, not much higher, rate of tax is essential for an optimal response to the challenges that we face," he said.

Turner argued that paying public sector workers more is necessary in the long term, but would require tax rises.

Tax cuts have become the key issue for Tory leadership hopefuls. (Institute for Fiscal Studies)

“We should address some issues both of inequality and dignity. We should pay people in care homes more..." he told a Resolution Foundation conference.

His remarks come as public sector workers threaten more large scale strikes not seen in decades this summer demanding higher pay rises amid the rising cost of living.

Rail workers confirmed plans on Wednesday for a fresh strike in the bitter dispute over pay, jobs and conditions.

Members of the Rail, Maritime and Transport union (RMT) at train companies and Network Rail will walk out for 24 hours on 27 July.

Elsewhere, analysts predict an even sharper than expected spike in energy bills this winter, raising questions over whether the Treasury's package of measures to help people through the cost of living crisis will be sufficient to protect the most vulnerable.

Energy bills are expected to soar in the winter of 2022 (Yahoo News UK/ Flourish)
Energy bills are expected to soar in the winter of 2022. (Yahoo News UK/Flourish)

Read more: Martin Lewis: UK needs ‘new leaders in office asap’ ahead of ‘catastrophic’ winter

On Monday, energy watchdog Ofgem conceded that the energy price could surpass £3,200, higher than their previous prediction of £2,800.

The government's spending watchdog the Office for Budget Responsibility (OBR) has warned tax cuts are not a practical long-term solution when it comes to the economic outlook for the UK.

“Tax cuts don’t pay for themselves and would not improve the long-term financial position,” said the OBR’s chief of staff, Andy King.

“In every case I can think of, when we look at tax cuts, the direct fiscal cost of cutting that tax outweighs the indirect fiscal benefit of improved economic activity.”

In contrast, almost every Tory leadership hopeful has said cutting taxes will help boost the economy and tackle the rising cost of living.

The OBR has also said the UK's economy is currently on an "unsustainable path" regarding spending and borrowing.

Watch: Taxes will definitely be cut, says Michael Gove