Yet more tax hikes! Do the Tories have a death wish? - Brian Monteith

While at Friday’s Public Audit Committee Nicola Sturgeon accepted no blame that equated with accepting responsibility for the expensive scandal that is the Fergusons ferry contract.

Prime Minister Rishi Sunak alongside the Chancellor of the Exchequer, Jeremy Hunt holds his first Cabinet meeting. (Photo by Stefan Rousseau - WPA Pool/Getty Images)

Nor will she accept responsibility for the still to come resolution of the potentially larger subsidy and underwriting guarantees of the Gupta purchase of Dalzell and Clydebridge steelworks and Lochaber aluminium smelter. When grossing those examples up to £586m, we are talking about a magnitude of double the busted ferry contract budget.

The same Nicola Sturgeon and ministers – who, remember, even before Covid arrived could not deliver the energy company they promised or make a go of Prestwick or Bifab – now want to provide a National Care Service for a cost auditors believes could “spiral”. Would you honestly put your loved ones in their hands?

And yet for all the Scottish Government lurches from one blameless catastrophe to another – each more worthy of the ministerial resignations that Kwasi Kwarteng and then Liz Truss were forced to concede – I need to turn not to the hollowing-out of devolution as a defendable proposition but to the even greater failure of the Conservative Party at the UK level. This is not to let the SNP off from its responsibilities – I can and shall return to them in time – or to suggest that UK problems suggest Scottish secession would be preferable. Quite the reverse.

What I wish to argue is that so long as there is not a genuine conservative economic proposition on offer (and by shouting for a “Tory-Free Scotland” the SNP would prefer it did not exist) our country is doomed to face economic consequences not experienced since the worst years of the seventies and eighties.

I write this because currently Rishi Sunak and Jeremy Hunt are running an expectation management operation whereby a variety of extreme policy kites are being flown to first, gauge the reaction to a number of outrageous tax grabs they would like to get away with, and second to give them the room to pitch marginally lower tax rises than are being flown so they can then create a public mood that the worst has been avoided.

The first part of that strategy is to support the false narrative there is a £50bn black hole in the government’s public finances and the second is to then raise taxes and cancel some government spending to fill in that black hole.

Forming a pincer movement on the public is the unforgiveable behaviour of the current Governor of the Bank of England who has presided over escalating domestic inflation – having told us initially the risk was exaggerated, then it was all manageable and would not be long lasting. Now he’s telling us we are moving into a two-year recession and (like Sturgeon in Scotland) takes no responsibility for failing in delivering his mandate of supressing inflation.

But why would a Tory government countenance raising taxes? Simple, because it is not conservative but just another conglomeration of centrist politicians from the Blairite mold of style over substance. Rather than find measures that will encourage economic growth – the antithesis and remedy for a downturn – Sunak wants to come over as being able to lead the country from its woes (that are chiefly of his making) and is especially willing to make the wealthiest pay (as an antidote to the perception that he, being personally wealthy, will not tax the rich). Yet we shall all suffer.

Taxes will not be cut so we can pull ourselves out of our torpor but be hiked so we live through a longer, deeper recession than need be.

The latest targets being identified are those who have saved for their private pensions or invested and might want to access in these straightened times their apparent gains.

It was those who saved through their working lives that were punished most by Chancellors Brown, Darling, Osborne and all the way through to Sunak – now the idea is to punish savers all over again by extending the freeze on pensions lifetime allowance for another two years to 2028. Why this stealth tax? Because it is not obviously noticeable to most voters – but it has profoundly damaging affects, most damagingly persuading successful and productive professionals to retire earlier.

Slashing pension tax reliefs reduces economic activity (why carry on working?), threatens the collapse of the NHS (doctors and consultants retire early, creating shortages that extend waiting lists and times) and persuade many to stop saving for their old age – creating a greater financial burden for the state in a generation’s time.

Likewise, increasing Capital Gains Tax is like pouring sand into the gearbox of the economy, it impedes the flow of capital from less profitable investments to ones with higher rates of return, thus limiting the growth of newer, more profitable businesses. Raising CGT runs counter to creating a more dynamic prosperous economy, ideally it should actually be cut.

CGT is also arbitrarily unjust. With inflation at 10 per cent an asset bought for £100,000 and sold two years later would have to bring in at least £121,000 to avoid a loss, but the state will still seek to tax this illusory ‘gain’.

Other tax cuts, now abandoned, will hit the poorest – and yet HS2, the £50bn politicians’ train set, will still go ahead.

Does this government really have a death wish, is Sunak an agent of Blair on an operation to destroy the Tory Party from within? At times I (and I expect many others) feel there really is no political party that represents what I believe. In such circumstances democracy truly is broken.

Brian Monteith is a former member of the Scottish and European Parliaments and a Senior Adviser to the Tax Reform Council