Tax cuts must be a part of the post-Brexit agenda
It's time to give the economy a boost with tax cuts, ratcheting back the damage done by continually increasing tax burdens, writes John Redwood MP
The government has frequently used higher taxes to stop or reduce activities that it does not approve of, with considerable success. These policies have slowed the economy a bit as a result. Given that the government knows how to do this, wouldn't it be a good idea if it did more the other way, identifying how cutting taxes might stimulate more activity?
It does recognise that taxing work too much is a bad idea, and has been cutting the tax on work by removing more people from Income Tax altogether and raising the tax free allowance generally. This has been a helpful background to boosting employment, which has been rising steadily as Income Tax has been reduced by this method. The more that can be done to reduce the tax on work the better, as all political parties claim to believe that work is a good thing. If you want more work in any given country you need to ensure the tax rates on work are internationally competitive. The UK needs to revisit its rates in the light of the sweeping US tax cuts.
There are other examples where taxes have been raised on behaviour which the government says it favours. Most of these relate to entrepeneurship and saving. The government says it wants people to save so they have money for their old age and for any adverse event that may befall them. It says it wants to encourage more people to set up their own businesses and to venture their money to help establish and expand other people's businesses.
If this is the case then why has the government hiked Stamp Duties? Why does it persist with a 28% Capital Gains Tax rate on property? Why has it cut pension tax reliefs?
Stamp Duties and Capital Gains tax are taxes people do not have to pay. They are easily avoided by doing nothing. Those in the fortunate position of having made past successful investments can sit on them. Those who aspire to own investments can be put off by the transaction taxes. People keep properties that may be too big for them or are no longer in the best place for them as they do not wish to pay the CGT on sale or the Stamp Duty on buying something more suitable. As we have seen Buy to let investment in new homes or conversions to provide more rented accommodation for others has been hit hard by higher taxes.
The government could and should do more to promote savings and enterprise. The best and most energetic can flourish, but we need a tax system which makes it easier for everyone, so the more marginal projects find cash and support.
John Alan Redwood, Baron Redwood, is a British politician and academic who represented Wokingham in Berkshire as Conservative Member of Parliament from 1987 to 2024. Born on 15 June 1951, he served as Secretary of State for Wales under John Major and twice stood unsuccessfully for the Conservative Party leadership during the 1990s. Following his ministerial career, Redwood held positions in the Shadow Cabinets of William Hague and Michael Howard before spending his remaining parliamentary years as a backbencher. Prior to entering Parliament, he earned a doctorate at All Souls College, Oxford and served as Director of the Number 10 Policy Unit under Margaret Thatcher.
A veteran Eurosceptic described in 1993 as a pragmatic Thatcherite, Redwood has been particularly known for his work on economic policy and European matters. He co-chaired the Conservative Party's Policy Review Group on Economic Competitiveness until 2010 and serves as Chief Global Strategist of investment management company Charles Stanley & Co Ltd. Redwood was a prominent supporter of Brexit in the 2016 EU referendum and was a member of the pressure group Leave Means Leave. He writes commentary for Comment Central.
