Chancellor Rishi Sunak faces a growing Tory revolt over economic policy and his handling of the cost of living crisis, as senior Tories warn that high taxes will fatally undermine their party’s appeal to the masses. voters in the next general election.
Former Tory cabinet minister David Davis said on Saturday that while the Tories became known as the high tax party, the damage to their economic reputation would be as deep and lasting as that inflicted on the government of John Major by the Black Wednesday disaster in September 1992.
Davis told the Observer that with the country now operating with the highest overall tax burden in decades, the electoral dangers were clear.
“Gaining a reputation as the high-tax party will hurt the Conservative Party as much as the ERM crisis did to us in the 1990s,” Davis said.
The UK’s chaotic and costly exit from the EU exchange rate mechanism tarnished the Major government’s reputation for economic management and set it on course for the landslide defeat of New Labor in 1997.
A poll for the LabourList website last week sparked serious concern among Tory MPs as it found the Tories were already seen as the high-tax party by more voters (39%) than this opinion work (27%).
Asked what they considered the low-tax party, 30% cited Labor and 27% cited the Conservatives in the Savanta ComRes survey.
Even after offering some limited tax cuts in last month’s spring statement, as Sunak tried to blunt the effects of the cost of living crisis, the overall tax burden in the UK is still at its worst. high level since the 1950s, when the country was rebuilding after World War II.
Sunak, who would travel to California for an Easter holiday, used his spring statement to cut fuel taxes by 5 pence a liter and announced that the threshold at which people start paying National Insurance would rise from £9,568 to £12,750 in July.
While insisting he was committed to low taxes, however, he decided to withhold most of an estimated £20billion war chest from extra tax revenue resulting from inflation for the pre-election tax cuts. In a highly unusual move, he promised a reduction in the basic rate of income tax from 20p to 19p – but not before 2024.
Many Tory MPs believe he should offer tax cuts now to spur growth, and that it will be too late to pose as chancellor of tax cuts in 2024. Others have blamed him not doing enough to support low wages and those on benefits.
As protests over the cost of living unfolded across the country on Saturday, former Conservative leader Iain Duncan Smith said that instead of keeping taxes high to control the deficit, Sunak should boost economic growth by lowering them, and at the same time offering more help to people on Universal Credit by increasing the amount they can earn before their benefits are reduced.
Warning of continued high taxes and the risk of stagflation – low growth and rising inflation – Duncan Smith said: “Fiscal compression is a disaster right now and we shouldn’t be doing it. Reducing the deficit will actually make the stagflation problem worse.
Veteran Tory MP Peter Bone says the Chancellor must act now to cut taxes, or risk a repeat of the 1990s when voters became fixated on a lack of Tory economic skill that proved impossible to change before the 1997 general election.
“John Major got the economy back on track [after the ERM debacle] but the electorate had made its decision long before and had said to itself: “we are going to give the others a chance”. We still have time to get it right, but we have to do it now. We need to correct course now.
A new analysis by the Resolution Foundation of tax measures taken by Sunak reveals that they will raise £14 billion in the financial year.
Shadow Chief Treasury Secretary Pat McFadden said: ‘The Conservatives have become the party of high taxation because they are the party of low economic growth. The Conservative government is the only G7 country to raise income taxes this year.
Labor proposes a windfall tax targeted on the profits of North Sea oil and gas companies to help families pay their energy bills, and have always opposed higher National Insurance contributions by Sunak.
There are also pressures from elsewhere for private companies to offer their help. A study of shareholder payments made by the ‘big six’ energy providers shows that dividends and share buybacks amounted to £43.5billion over the past decade.
The Common Wealth think tank, which carried out the study, said the suppliers – Centrica, EDF, E.ON and its subsidiary nPower, Scottish Power and Scottish & Southern (SSE) – were in a sound financial position and could afford to offset some of the soaring electricity and gas prices for their customers.
Meanwhile, growing pressure is being felt by food banks as people struggle to make ends meet and resort to increasingly desperate measures to keep warm and feed their families.
Gerard Woodhouse, a local labor councilor who runs the L6 community center in Everton, Liverpool, told the food bank and food union that charity runs were opening six days a week instead of four due to increased demand, but at the same time had seen a reduction in donations in recent days because “people who once gave now need help themselves”.
“The stores give out potatoes, leeks, cabbages, but I can’t get rid of them. They are returned to me because people say, ‘It costs too much to cook’,” he said.
In other cases, “people go to bed at 6 p.m., so they don’t need to turn on the heating or use the electricity. The amount of people asking for thicker duvets is crazy. If I had had 200 this week, they would have gone,” he said. “You hear about the bad times of the thirties. These stories are happening now today. It’s just gonna get worse and worse. »