Liz Truss allies to offer Jeremy Hunt an alternative low tax Budget

Liz Truss - Frank Augstein/AP

Liz Truss – Frank Augstein/AP

Liz Truss’s allies will hand Jeremy Hunt another low-tax Budget as they press him to set out a growth plan, according to the Telegraph.

MPs are set to present him with a blueprint that would reduce the burden on businesses amid fears that Britain has become uncompetitive.

It comes after senior Tories warned the chancellor that a clear majority of the backbenches want taxes to be cut at next month’s Budget.

But Treasury insiders have a firm position and insist that the reduction of levies is now “only fueling the inflationary fire” and hindering the recovery of the United Kingdom.

Leading business figures, including the Confederation of British Industry, urged Mr Hunt to introduce new tax breaks to prevent a damaging recession.

Calls for a change of heart are being led by the Conservative Growth Group (CGG) of Members who have given broad support to Ms Truss’s economic vision.

Asked about the group’s plans, a source said: “We are happy to work with Jeremy Hunt to help him achieve the Prime Minister’s growth objective.”

The group wants the Chancellor to scrap the rise in Corporation Tax from 19 to 25 per cent and reform levies that affect the self-employed.

Plans being drawn up for the group would also abolish VAT on energy bills and reduce sky-high green levies on heavy industry.

The package includes proposals supported by Ms Truss, but falls short of her disastrous mini-budget.

The former prime minister has said she stands by her radical agenda but has blamed the “powerful economic establishment” and her own Conservative Party for her downfall.

More than 50 MPs are said to support the CGG, enough to defeat the Government, with the Tories now fiercely divided over taxes.

Ranil Jayawardena, one of the founders of the organisation, told the Chancellor that Corporation Tax at 19 per cent would “pay for itself”.

“Look at AstraZeneca’s decision not to build its new £300 million factory here, which would have created more good jobs and boosted tax receipts,” he told the Telegraph.

“Growing the economy by encouraging entrepreneurship and encouraging investment is the way to pay for our public services.”

Sir Iain Duncan Smith, the former Tory leader, warned Mr Hunt not to “push the economy forward in pursuit of inflation, as that would be a disaster”.

“It is easy to have a majority on the back benches for the opinion that we need tax cuts in the Budget,” he told the Prime Minister.

Sir John Redwood, a senior MP who headed Margaret Thatcher’s policy unit, has drawn up a program of potential tax cuts that could bring the group back.

It is supposed to focus on the targeted reductions that would do the most to stimulate business investment and stimulate economic growth.

After internal consultation, the package will be presented to Mr Hunt ahead of his budget on March 15.

“Dozens of Conservative MPs are of the opinion that we need more positive measures behind the growth strategy that the Government has announced,” Sir John told Sky News.

“The majority of the Conservative backbenchers … will agree that they want targeted tax cuts. The majority definitely believe that you don’t get growth without more realistic tax levels.”

David Jones, a former Cabinet minister, said he had personally raised concerns with Mr Hunt about reversing the Corporation Tax cut.

He said AstraZeneca’s public admission that it chose Ireland for its new factory because of the country’s lower rate should “serve as a huge warning to the Government”.

“If the tax system has the effect of stopping companies from setting up and expanding in this country, the Government must really listen,” he said.

“We should be listening to sensible economists who are telling them they can’t cut taxes and expect growth to come.”

‘It is extremely difficult to legitimize’

A Treasury source insisted that Mr Hunt “wants to lower the tax burden but we need sound money first” and that “high inflation is the single biggest obstacle to growth”.

“Any additional borrowing to finance tax cuts or spending right now will only fuel the fire of inflation, adding to the pain for everyone,” they said.

Andrew Mitchell, the development minister, said the Tories were “the party of tax cuts” and “we all want to see tax cuts”.

“Tax cuts are very important but they have to be done at the right time. We will get them when we can but right now it is very difficult to protect them,” he said.

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