By Daily Mail Comment
We were promised a ‘fiscal event’. What we witnessed in the Commons yesterday felt more like a political earthquake. Welcome to Trussonomics, Tory in tooth and claw.
In addition to the well-trailed reversal of the national insurance hike and cancellation of planned increases in corporation tax came a cascade of cuts and liberalisations.
A penny off the basic rate of income tax and abolition of the 45p top level.
Creation of tax-friendly investment zones in struggling regions, planning reforms to accelerate dozens of major infrastructure projects. Swingeing cuts in stamp duty, especially aimed at first-time buyers, removal of the cap on bankers’ bonuses and even cheaper alcohol. It was heady stuff.
We were promised a ‘fiscal event’. What we witnessed in the Commons yesterday felt more like a political earthquake. Welcome to Trussonomics, Tory in tooth and claw
In total, this ‘event’ delivered tax cuts worth £45billion – the biggest single reduction in 50 years – leaving more money in everyone’s pockets.
It was, said Chancellor Kwasi Kwarteng, ‘a new approach for a new era’. An unabashed repudiation of the prevailing tax-and-spend orthodoxy that stifles aspiration and productivity.
For too long, he told the House, Britain had concentrated on redistributing wealth rather than creating it.
Who could forget David Cameron’s mantra about ‘sharing the proceeds of growth’. A noble thought, but the problem comes when there’s no growth to share – as there hasn’t been for some time.
On a falling tide, all boats sink. Trussonomics is an ambitious strategy to turn the tide and raise them up.
It puts clear blue water between the Conservatives as the party of economic freedom and Labour as that of the overweening state.
Predictably, the Left headed straight to the barricades yesterday. Tax breaks for bankers, business and those earning above £150,000 showed the Tories were concerned only with serving the interests of the rich and powerful, they said.
As ever, they completely miss the point. These reforms are intended to affirm that making profits and earning good salaries for hard work are not sins, but positive virtues.
Few would die in a ditch to defend bankers’ bonuses but financial services contribute more than £75billion to general taxation, helping pay for hospitals, schools and other public services.
That’s because the City of London is the world’s greatest financial hub. To retain that position against stiff competition from New York and elsewhere, it must pay to recruit the best.
Similarly, abolishing the 45p income tax rate is a genuine incentive to work harder and should be of financial benefit to all. When the rate was originally cut from 50p to 45p in 2012, the tax take actually increased by £8billion. The same should happen again.
And even the class warriors must concede that the cut in basic rate helps the low-paid, and that the poorest in society received targeted help in the energy price package.
The economy is stagnating and in desperate need of a kick-start. Liz Truss and her Chancellor have produced a radical and intellectually coherent plan to achieve that
It’s true that Trussonomics is a gamble. But it is a calculated one.
The tax cuts and cost of living handouts together will cost more than £100billion. If the energy crisis rumbles on through next year and beyond, more may well be required. That money has to be borrowed and, of course, repaid. But by going all out for growth, it is hoped that economic expansion will cover the cost.
That is the gamble. We can’t yet know how well it will pay off. It requires the British people to play their part by increasing productivity in return for keeping more of their own money.
But doing nothing is not an option. The economy is stagnating and in desperate need of a kick-start. Liz Truss and her Chancellor have produced a radical and intellectually coherent plan to achieve that. There is every sign it can work.
Published by Associated Newspapers Ltd
Part of the Daily Mail, The Mail on Sunday & Metro Media Group