British Tax Cuts: Too Little, Too Late?

Too little, too late? That’s the fear after Prime Minister Sunak and his Treasury chief, Jeremy Hunt, straggle in with a tax cut plan for Britain in the shadow of anemic growth projections and a general election that threatens to extinguish the Tories’ majority in Parliament. Normally, such a plan would be cause for cheers, yet it’s hard to muster much enthusiasm after the Tories threw away a golden opportunity to cut taxes under Prime Minister Truss.It’s tempting to consider how much brighter now the Tories’ future would look had the party embraced the pro-growth, supply-side tax cut put forward by Ms. Truss and her doughty Treasury chancellor, Kwasi Kwarteng, little more than a year ago. Then, he was crowing about it being “half a century since we have seen tax cuts announced on this scale” and vowing “to expand the supply side of the economy.” A “new era, focused on growth,” Ms. Truss said.The ambitious Truss-Kwarteng proposal, which called for trimming Britain’s excessive top marginal income tax rates, had the potential to shake the sceptred isle out of its economic torpor and fulfill the promise of Brexit. Yet the proposal vanished about as quickly as a West End flop — and led Ms. Truss, after but 44 days in office, to get the hook. For that Britons have, in no small part, the International Monetary Fund to thank.It was, after all, the IMF that roiled the markets and shook confidence in Britain’s fiscal health while the ink was hardly dry on the details of Ms. Truss’ tax-cut plan. The IMF remarks, prompted merely by a Reuters inquiry, followed no special analysis of the plan. “We do not recommend large and untargeted fiscal packages at this juncture,” the IMF decreed. The kiss of death was a prediction that “the nature of the UK measures will likely increase inequality.”How, one might have asked, did the IMF arrive at such a sweeping conclusion after the most cursory of examinations of Ms. Truss’ plan? The answer, of course, is that there was no basis for it. The appraisal was merely a reflex reflecting the IMF’s leftist opposition to free enterprise and enthusiasm for statist economics. In that regard the IMF was joined by the noble comrades on the editorial pages of London’s Financial Times.The FT’s editors warned that the tax cut would “set the British economy down a hazardous path,” suggesting that “fiscal discipline will take second place to stoking the economy.” The FT editorial fretted that “tax cuts will only stimulate demand in an already supply-constrained economy,” decrying “Trussonomics” as a “hefty political and economic gamble.” Labor piled on, calling the cuts “a budget without figures, a menu without prices.’’ These unwarranted denunciations overlooked how similar tax cuts under Prime Minister Thatcher — paired with deregulation and defanging labor unions — had, in the 1980s, “transformed” the British economy, as the Telegraph put it, “into one of the strongest in the western world.” Thatcher’s achievements, though, fell into abeyance, and the Telegraph recently warned that Britain’s tax burden has hit the highest share of the economy since 1949.Yet blame for the failure to launch Ms. Truss’ tax cuts cannot be confined to the British left. Where was Mr. Hunt when he might have helped Ms. Truss’ plan succeed? “It was wrong to fly blind,” he crooned, “and to announce those plans” without announcing spending offsets in advance. “This was the most unkindest cut of all,” one might say. It ignored, too, the opportunity to offset much of the purported “cost” of the cuts via faster economic growth. Mr. Sunak was similarly circumspect at the time. Their failure to jump at the chance proffered by Ms. Truss set the stage for the Tories’ ominous prospects today. Not only for the party, which faces years in the political wilderness, but for British independence, which hangs in the balance as a resurgent Labor party and its ancillary Remainers salivate at the chance to lash anew Britain to the mast of the continental superstate — and raise taxes, to boot.

British Tax Cuts: Too Little, Too Late?

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