A shadow cabinet minister has reacted with dismay to renewed calls for tax cuts from Conservative MPs, as the backbenchers react to new ONS figures which show the budget deficit for July was lower than forecast.
Pat McFadden, the shadow chief secretary to the Treasury, cited last year’s “disastrous mini-budget” which he said should serve as a warning about the dangers of taking an irresponsible approach to the public finances.
He said: “[The mini-budget] is not an experiment we want to repeat. I was a bit alarmed at hearing Tory calls to repeat it yesterday. I think that’s a big risk for the country – certainly not one that we would adopt”.
Mr McFadden said that while Labour is not opposed to tax cuts in principle, they have to be affordable.
He added: “We saw last September what happens if tax cuts are unaffordable and judged to be unaffordable. And the consequences at that time were booster rockets under mortgage, rates, the Bank of England having to rescue pension schemes and a real rocking of international confidence in the UK economy. So you can’t go down that road unless it’s affordable.
“So for us, always, this term – responsibility and stability with the public finances”.
The chancellor Jeremy Hunt has also been downplaying the prospect of tax cuts, stressing the need for responsibility yesterday.
But the pressure is increasing on government after newly-published Office for National Statistic figures showed the budget deficit for July was a bit lower than forecast by the Office for Budget Responsibility (OBR).
The Financial Times reports that Sir John Redwood, a former cabinet minister, said the OBR had been “ridiculously pessimistic” in its forecasts and that the chancellor should act swiftly to cut taxes and hold down public spending.
Sir John added that by cutting some businesses taxes, such as raising the VAT threshold for small companies, and reducing energy taxes, the economy could grow faster without fuelling inflation.
Sir Jacob Rees-Mogg, the former business secretary, said the data exposed “the continued failure of the OBR” and that the scale of the forecasting gap left scope for tax cuts.
“This would pay for the total abolition of death duties and leave billions to spare — but more importantly it illustrates the mistake of setting policy based on the OBR’s auguries”, he said.
Meanwhile, David Jones, former minister and deputy chair of the pro-Brexit European Research Group of Conservative MPs, said: “I do think that there is more fiscal headroom now. There is a greater tax take, and that will be augmented by increased savings income as a consequence of higher interest rates.
“That should be converted into personal tax reductions. The chancellor should also be looking to stimulate the economy by reviewing the rate of corporation tax.”