Following Boris Johnson’s victory as Conservative Party Leader and Prime Minister, Philip Hammond resigned as Chancellor, as he said he would. For a man who was thrust into the biggest political challenge this country has faced, the economy under his chancellorship has performed well.
George Osborne predicted that if the country voted to leave, the immediate economic impact would be the loss of 500,000 jobs. But Trading Economics reported that the unemployment rate stood at 3.8 per cent in the three months to May 2019, its lowest level since the October to December 1974 period. Reaction stated that employment had risen by 400,000 18 months after Project Fear made their doomsday predictions, and that the economy grew just under 2 per cent since the EU Referendum. The Independent reported in April 2018 that Britain achieved its first budget surplus since 2002. This country has defeated the gloomy arguments the Treasury made in the months leading up to Brexit.
However, in the last three years, Britain’s tax burden has increased. Throughout his chancellorship, Hammond blamed the UK’s lack of productivity on leaving the EU. But the Taxpayers’ Alliance (TPA) revealed that the tax burden under this Conservative government is the highest it has been since 1969-70. In 2018, taxes accounted for 34.3 per cent of GDP, just under the 1969-70 figure of 35 per cent. Despite the lowest earners witnessing their taxes being cut or slashed altogether since 2010, the TPA stated that the bottom 10 per cent of earners pay 49.5 per cent of their income tax.
Throughout 2016-19, the UK witnessed the nanny state’s expansion under Hammond. The sugar tax imposed an unnecessary burden on those who depend upon sugar in their diets, and instead of slashing taxes, the former Chancellor flirted with ideas to increase taxation. These proposed taxes included an NHS tax, a chocolate tax, ending the fuel duty freeze, and higher inheritance tax, council tax, business rates, income tax and national insurance to pay for social care.
Yet if Hammond studied the evidence, he would have realised that lower taxes always bring in increased revenue. The Taxpayers’ Alliance revealed that corporation tax receipts have increased by 25 per cent in real terms after headline rates decreased from 28 per cent in 2010-11 to 19 per cent in 2017-18. Income tax receipts from the additional rate have increased by 37 per cent in real terms after the rate decreased from 50 per cent in 2010-11 to 45 per cent in 2013-14.
Of course, the former chancellor deserves credit for cutting stamp duty for properties worth £300,000 or less to enable more homeowners to climb the housing ladder. Blasting News reported in 2017 that the British Beer & Pub Association welcomed his decision to freeze beer duty, which secured 3,000 jobs in the pub industry.
Nonetheless, alongside generally increasing the tax burden, he failed to prepare for Brexit and he delayed solving the UK’s housing crisis. Whilst Hammond allocated £44 billion to fix the housing market, the RICS parliamentary and public affairs manager at the time, Lewis Johnson, said the plan will not deliver 300,000 new homes a year until the 2020s. What the housing market needs is bold tax reform. An Institute for Economic Affairs (IEA) paper revealed that taxes like the Community Infrastructure Levy and a housing contribution called Section 106 burdens housing developers. The think-tank proposed new measures like a Build It Yourself policy, granting development rights to ‘build and beautify’, reassessing the green belt, and reversing compulsory purchase orders to expand home ownership. But the former Chancellor’s desire to throw money at the problem, without dealing with the housing crisis’s root causes, proved that he failed to understand this issue from the beginning.
Unfortunately, Hammond became embroiled in his own scaremongering about a no-deal Brexit instead of tackling these issues. Tory MP John Redwood told an Economists for Free Trade dinner that his policies deliberately undermined the housing market and the economy just to ensure a no-deal Brexit would jeopardise the economy. The former chancellor repeatedly warned that leaving the EU without a deal would cost the economy £80 billion. He has deliberately undermined the Government’s negotiating strategy to thwart Brexit. Imagine how much better the economy might be performing if he implemented the radical tax and housing measures this piece has listed. Hammond has missed out on a three-year opportunity to make the UK one of the most competitive taxing regimes in the globe post-Brexit.
The former chancellor was fortunate to preside over an economy that beat Project Fear’s gloomy arguments. But it could have performed better if Hammond used his time to preside over radical tax and housing reform. This is why the Treasury deserves a true Tory at the helm, and hopefully we have one in Sajid Javid. But the last three years have been a waste for this country’s economy.