Gale`s View – October 2022

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October 7th 2022

 

It is generally accepted that faced with the death of a much-revered and long-serving monarch within moments of taking office the Prime Minister conducted herself with considerable poise and great dignity. Although not a natural orator her tributes to the Queen were heartfelt and well-received and millions of people around the world will have had their first sighting of Britain’s new Prime Minister and formed a favourable impression when she read the scriptures at Her Majesty’s funeral.

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The energy-price bailout package, designed to ensure that for two years average domestic fuel bills do not exceed £2500 a year, coupled with a six-month winter relief measure for businesses, was eye-wateringly expensive but generally well received. It is not possible to protect all households, some of which have above-average energy use for medical reasons for example, or all businesses – again Care Homes and Bakeries and the Hospitality industries use a disproportionate amount of fuel because of the very nature of their business – but it is clear that the Government wants to be on the side of the consumer.

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If she had paused there, she would have denied the Labour Party the stick to beat her with at their Conference and Mrs. “We can ride out the storm” Truss would probably have emerged from the Conservative Conference in Birmingham as the darling of the Party. But on Friday 23rd September The Chancellor of the Exchequer unveiled a `fiscal package’ that was in effect not a mini but a full-blown budget that had not been discussed by the Cabinet and that sent international money markets into a tailspin with the pound falling like a stone and raised the threat of massive interest-rate rises. This, in turn, caused real fears amongst those with large mortgages and amongst businesses still trying to pay debts incurred during the pandemic.

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To clarify: the economy has been flatlining for far too long. It needed a shot in the arm to stimulate growth. But an announcement of this kind, made without figures to support how tax cuts are going to be paid for, without a supporting business plan and without reassurance for those fearing that they may face ruin as interest rates rise, demonstrates an unacceptable degree of inexperience at the heart of this administration. This has caused self-inflicted and unnecessary damage to the economy and to people’s lives.

There is nothing wrong in cutting taxes – the Conservatives are instinctively a low-tax party and taxes have been allowed to rise far too high for far too long. However, tax cuts paid for out of increased borrowing are not the way forward. Growth is needed but ”Growth at any cost” as announced by the Chancellor is a price too high.

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Reversing two of Rishi Sunak’s measures by not raising Corporation tax and not introducing the National Insurance surcharge is acceptable. Reducing Stamp Duty on property transactions and getting rid of the IR 35 tax regime that has so penalised the freelance labour markets has got to be a good thing. In the long run reducing taxation on the highest earners has always tended to attract the wealthy back to Britain and generates more in taxation revenue not less - but at a time of belt-tightening to give a tax cut to `the rich’ (without explaining the reasoning behind it ), was always going to be unacceptable.

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There are also worrying indicators that suggest that a bonfire of regulations designed to stimulate business growth may have the adverse effect: damaging the environment and releasing yet more much-needed agricultural land for development.

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Since the`not-the-budget’, the Prime Minister and the Chancellor have been forced into a politically damaging hand-brake turn and there are warning signs of more trouble if proposals to cut benefits are brought forward. “Action this day” has its attractions but the Prime Minister has acknowledged that she failed to roll the pitch before the `Fiscal event’ and has learned that lesson the hard way. If Mrs Truss is to succeed, as I hope she will, then she has to learn the art of listening. There is wise and experienced counsel available and she must heed it.

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