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8 January 2024

Why tax cuts won’t improve Sunak’s polling

Even if taxes are increasing less quickly, they are still at a record high.

By Freddie Hayward

I doubt the Prime Minister will welcome MPs’ return to parliament today (8 January). The Tory Chris Skidmore, who signed the net zero carbon emissions target into law under Theresa May, has said he will quit the Commons in protest at a new bill expanding oil and gas licensing. Expect more push-back when it comes before parliament today. Skidmore already said he was leaving at the general election, but he clearly couldn’t stomach a few more months. That means yet another by-election, on top of one in the Northamptonshire constituency of Wellingborough, and probably another in Blackpool South.

All of which will be unwelcome in No 10: these by-elections risk striking fear into Tory MPs, feeding the impression of inevitable defeat and consuming the vital airtime that Sunak needs to put his ideas across to the public.

His message of the month is that he’s the man to cut taxes. Sunak told the Sunday Telegraph that he will deliver further tax cuts by “controlling” (read: cut) welfare spending.

But does he actually think that? I suspect that Sunak, like everyone else, will have noticed that the £10bn tax cut announced in the Autumn Statement has not reversed his fortunes in the polls. And why would it? Even if they’re now increasing less quickly, taxes overall are still going up.

We saw a similar pattern with the large amount spent protecting people from energy-price spikes and inflation. The government said in the autumn that £104bn will be used on cost-of-living support between 2022 and 2025. Yet the political benefit has been minimal. That’s probably because, just as with tax, the overall picture is bleak. As the Resolution Foundation notes: “British households will, for the first time on record, be poorer at the end of a parliament than at its start.”

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Though a tax-cutting poll boost remains elusive for Sunak, the record-high tax burden means cuts have an appeal for politicians. Keir Starmer said on Sky News yesterday (7 January) that he hopes to reduce taxes for working people, which he wants to fund through (you guessed it) economic growth. This line has dripped into Labour’s message over the past few weeks.

If Labour is to make tax cuts central, the next question must then be: is the era of growth that Labour will usher in going to be so large it will allow Starmer to cut taxes and reduce debt and increase spending? He doesn’t seem to think so. His retreat on the green prosperity plan (he downgraded the £28bn to a “confident ambition” on Friday) suggests he recognises his fiscal rules create trade-offs between spending, tax and debt in the short run, and that growth might not be able to fund large spending in the long term.

And yet Starmer is mooting tax cuts. This invites another question: if strong growth frees up another billion pounds within the fiscal rules, would he rather spend that on tax cuts or green investment? As Starmer’s shadow cabinet colleague Bridget Phillipson put it on the BBC yesterday, politics is about choices.

This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.

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