Tory MPs slam Hunt’s tax hikes

Tory MPs slam Hunt’s tax hikes
Tory MPs slam Hunt’s tax hikes

British Chancellor Jeremy Hunt faced a backlash from Tory MPs angry at a new era of high taxation even as the IMF hailed his efforts to restore the country’s fiscal credibility.

On a day when two leading think tanks said high taxes had arrived for good and wages were set for their most prolonged period of stagnation since the 19th century, Hunt insisted that his budget cut of £55 billion was “fair”.

But Tory MPs on Thursday hit the £25bn in tax hikes, which take Britain’s tax burden to 37.1% of economic output, the highest since World War Two.

David Jones, a former Welsh secretary, said the Conservative Party’s prospects of winning the next election “will dim” if the tax hike plan remains in place.

Citing traditional Tory arguments about the impact on incentives and the overall health of the economy, Richard Drax, MP for South Dorset, said the tax hike “risked stifling growth and productivity”.

Jacob Rees-Mogg, a former business secretary, told Channel 4 that Hunt had taken the “easy option” of raising taxes.

The rapid shift from unfunded tax cuts from September’s “mini” budget to the biggest fiscal consolidation since 2010 has unsettled MPs and party supporters, who have become uncertain about the economic model the party is now pursuing.

While Hunt has insisted his platform is “compassionate” because of measures to protect pensioners and benefit recipients, many conservatives fear it will leave low- and middle-income voters exposed.

As Tory-supporting newspapers railed against the government, the Daily Mail’s front page headline read: ‘Tories Dip Activists’.

But economists have widely welcomed the government’s new fiscal prudence, illustrating how Rishi Sunak’s administration risks being pulled in different directions by political and budgetary demands.

IMF Managing Director Kristalina Georgieva said Hunt had struck “the right balance between fiscal responsibility and protecting growth and vulnerable households.”

Other economists have called for even bigger tax hikes to head off interest rate hikes by the Bank of England as it seeks to tackle high inflation.

Ben Nabarro, chief UK economist at Citi, said Hunt’s measures were “the bare minimum” needed to restore the UK’s fiscal credibility and were not enough to stop the BoE from rising further. interest rates.

He said the BoE could raise rates from the current 3% to 4.25%.

Hunt has urged Tory MPs that his autumn statement can help secure victory in the general election due in 2024, as it will restore confidence in the party’s ability to manage the economy.

“A Conservative election win is underrated,” a colleague of Hunt said. “If you saw the sullen look on Labor’s faces during the autumn statement, you could see it was not what they expected.”

Sunak argues that the next election can be won but only if Tory MPs show discipline and support the new economic strategy, according to his allies.

The prospect of a recession, falling house prices, rising unemployment, high inflation and rising mortgage rates over the next 12 months will be a major test for the courage of the party.

“The truth is that we have become much poorer. . We’re going to have a long, difficult and unpleasant journey,” said Paul Johnson, director of the Institute for Fiscal Studies, who argued on Friday that higher taxes were almost certainly “here to stay.”

The Resolution Foundation, another think tank, added that British workers were “experiencing two decades of wage stagnation”, with average real wages not expected to return to 2008 levels until 2027.

Such prolonged stagnation in real wages had not occurred in this country since the 1820s, according to figures calculated by the Financial Times.

Labor has accused the Tories of unfairly squeezing ordinary working people. Rachel Reeves, shadow chancellor, said they had seen their ‘pockets picked’.

. Tory MPs slam Hunts tax hikes