A windfall tax here, a subsidy there, a price control here, a nationalised business there and gradually you lose private capital.
By The Telegraph –
Mar 16, 2023
We needed a better paid jobs, more investment, good news, growth type of budget. The one delivered yesterday promotes more employment with useful measures to encourage more people to get into the workforce which is welcome. But it also comes with higher taxes, higher state spending and an increased role for the state in the economy. This is not yet the march of the makers, the liberation of the growers, the freeing of the small businesses, the attraction of the big companies and investors that could boost our output, cut our imports and lift our spirits. This Budget that rightly says the wholehearted socialism of the opposition parties would be worse, but thinks a bit of state direction and interference is what is needed. It includes unfunded spending increases.
This Budget prolongs energy subsidies, imposing windfall taxes and higher corporation taxes on energy suppliers and VAT on domestic energy consumers and motorists. Why the money go round? Why big taxes on energy when the price of energy is too high and has been so inflationary? It looks as if adopting the opposition’s favoured higher energy taxes will cut investment in domestic oil and gas, making us more dependent on imported fossil fuels with their added property of increasing world CO2 in their production and transport. Without more domestic energy the tax revenues will fall from the sector, the balance of payments tilts further into the red and we lose the well paid highly productive jobs. Why are we continuing subsidies for higher income homes to cushion the costs of using luxury levels of energy at home?
Much of industry needs large quantities of fossil fuel to produce iron, steel, ceramics, glass, chemicals, aluminium and much else. The UK imposes very high carbon taxes, hikes the corporation tax and then wonders why so much is closing. Subsidies are ploughed in to offset some of the taxes, but too little too late to save some at risk plants.
We could expand small businesses rapidly if they would lift the VAT threshold. Small businesses innovate, offer flexible service and can move quickly. We could start more businesses if the tax regime was friendlier for self-employed people trying to build multi-client businesses. We need more small firms in areas ranging from building through maintenance to personal care and support.
We could keep and attract much more investment here if we set a competitive corporation tax rate. Why not match the Irish rate? The EU seems to want to align us in other respects with rules and laws in Ireland so why not do so with their most successful business policy? We know it works. Ireland raises so much more business tax than we do per person thanks to so many more companies setting up business there and expanding there. Investment allowances help a bit, but large companies also look at the longer-term profits and cash flow of an investment which are seriously hit by a 31 per cent increase in the tax charge on yearly profits.
A lot of socialism as recommended by opposition parties, such as Labour, takes you on a walk along a path paved with good intentions through mediocrity to poverty. A windfall tax here, a subsidy there, a price control here, a nationalised or government-led business there and gradually you deter and lose private capital and competitive enterprise. Go the whole way like Venezuela and you end up with lots of permanently empty shelves, rationing and an absence of investment. Talented people rush for the exit. Doing a bit more of the tax and subsidy merry go round will not increase the supply of homes, energy or food to ease our shortages.
We need a capacity revolution. Cut the tax rates and grow more. Cut the rates and cut the deficit. Every time Conservative governments have cut business and income tax rates they have grown the revenues. The photo of Nigel Lawson in Number 11 should remind the Government that even a little bit of Conservatism can work wonders.
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