John Redwood says cutting taxes will 'stave off' a recession
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Sir John Redwood, a Tory MP who has represented Wokingham since 1987, told TimesRadio that “you end up borrowing more whether you have tax cuts or not”, suggesting that fears over Ms Truss’s plans to slash further financial burden on the public to ease the cost of living crisis need not be feared for delaying fiscal difficulty. Sir John claimed that a “longer and deeper recession” would result if taxes were not cut because businesses would succumb to their “colossal energy bills” and activity in the market would be stifled. Sir John’s comments come hours before the announcement of the new Prime Minister on Monday.
Sir John said: “You have the question of whether you end up borrowing more. Well, I think you end up borrowing more whether you have the tax cuts or not. That’s the problem.
“So, I think you may end up borrowing more with fewer tax cuts because I think you may have a longer and deeper recession.
“One of the main purposes of the tax reduction is to provide some offset to this colossal hit to income and activity.
“I mean, lots of businesses are thinking about closing or working less because they cannot afford the colossal energy bills, so something needs to be done for them.
“Lots of people are going to face the fact that after they have paid their energy bill and their food bill, they are not going to have money leftover to buy things they can no longer afford.
“And that is then somebody else’s job going. So, the purpose of these tax cuts in this situation is now to try to stave off a bigger and deeper recession.”
The incoming Prime Minister, expected to be announced at 12.30pm on Monday, will have to turn immediately to the urgent issue of surging energy prices.
Average annual household utility bills are set to jump by 80 percent in October to £3,549, before an expected rise to £6,000 in 2023, decimating personal finances.
Ms Truss has said she will appoint a strong cabinet if she wins the contest, dispensing with what one source close to her called a “presidential-style” of governing.
Britain has lagged other major European countries in its offer of support for consumer energy bills, which opposition lawmakers blame on a “zombie” government unable to act while the Conservatives ran their leadership contest.
In May, the government set out a 15-billion-pound support package to help households with energy bills as part of its 37-billion-pound cost-of-living support scheme.
Italy has budgeted over 52 billion euros ($51.75 billion) so far this year to help its people. In France, increases in electricity bills are capped at 4 percent and Germany said on Sunday it would spend at least 65 billion euros shielding consumers and businesses from rising inflation.
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Speaking in a TV interview on Sunday, Ms Truss declined to give details of the measures she says will reassure millions of people who fear they will be unable to pay their fuel bills as winter approaches.
She has signalled during her leadership campaign she would challenge convention by scrapping tax increases and cutting other levies that some economists say would fuel inflation.
That, plus a pledge to review the remit of the Bank of England while protecting its independence, has prompted some investors to dump the pound and government bonds.
The Institute for Fiscal Studies cast doubt last month on Britain’s next prime minister having room to make large, permanent tax cuts.
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