For immediate release
As featured in today’s edition of The Sun, economic modelling by the TaxPayers’ Alliance (TPA) has suggested that cutting VAT and income tax, as well as raising the national insurance threshold and scrapping the rise, would increase GDP by £56 billion by 2029.
Following the ONS’s latest stats showing GDP fell 0.3 per cent in April, the TPA has analysed the government’s options to boost growth over the next 10 years. They include measures such as cutting VAT to 17.5 per cent, the same as Gordon Brown’s 2010 cut to ease the pressure of the financial crisis. It’s predicted this would increase GDP by £3 billion alone.
However, the model also predicts the benefits of most potential tax cuts would be offset by the health and social care levy. Without the levy, a VAT cut could deliver £30 billion of growth, while bringing forward the income tax cut and doubling it would see an extra £19 billion. The full package of options, with income tax cuts brought forward and doubled, could be worth £56 billion to the economy over a decade, with earnings up by £676 a year and investment boosted by £12 billion.
Using official data from the Office for Budget Responsibility and other sources, the model can be used to show the outcome of a range of tax cuts, including taxes on income, businesses, capital and expenditure.
With mounting pressure on the prime minister to cut taxes to help with the cost of living crisis, the TaxPayers’ Alliance is calling on the government to start by bringing the planned income tax cut forward and double it to 2p in the pound.
The national insurance rises in April 2022 continue to drag on the beneficial impacts of other potential tax cuts.
Cutting the basic rate of income tax by either one or two pence would still mean lower average weekly earnings by 2029 because of the national insurance rises in April 2022.
A reduction in the main rate of VAT to the 2010 level of 17.5 per cent could mean GDP being £30 billion higher by 2029. However, if the national insurance rises from April 2022 are not reversed, it would only be £3 billion.
Combining a cut in VAT, income tax and raising the national insurance threshold could mean GDP being £56 billion higher, average weekly earnings £13 higher and investment spending up £12 billion by 2029.
John O’Connell, chief executive of the TaxPayers' Alliance, said:
“If things are as bad as the economic indicators say, now is the time for Boris to be bold.
“Politicians should remember that cutting taxes increases economic activity, boosts productivity, and puts money back into peoples’ pockets.
“Now is the time to help growth go gangbusters by bringing forward the income tax cut and doubling it.”
TPA spokespeople are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)
Media Campaign Manager, TaxPayers' Alliance
24-hour media hotline: 07795 084 113 (no texts)
Notes to editors:
Founded in 2004 by Matthew Elliott and Andrew Allum, the TaxPayers' Alliance (TPA) campaigns to reform taxes and public services, cut waste and speak up for British taxpayers. Find out more at www.taxpayersalliance.com.
TaxPayers' Alliance's advisory council.
The TaxPayers’ Alliance have launched a petition calling on the chancellor to immediately implement the planned income tax cut.
- Click here to read the article in The Sun.