Dear Rishi, what’s with the mad talk of tax rises?

Dear Rishi,

When Britain went into lockdown in March last year, you as Chancellor were one of the few government ministers who got the enormity of the situation, both economically and socially.

Within days you had fired off a couple of gigantic bazookas, paying out over £280 billion of taxpayers’ money in 40 various furlough schemes, grants and loans to protect jobs and businesses around the country. You even twisted the arms of the banks – which don’t like to lend to SMEs even in the best of times – to extend loans to millions of businesses.

You spoke movingly about how “now more than at any time in our history, we will be judged by our capacity for compassion,” and drew praise from across the political spectrum. Indeed, the TUC’s Frances O’Grady said you had shown “real leadership” – no mean feat for a Conservative chancellor.

It was the right thing to do. If a government suspends the free market by diktat, then it can only be the government – the taxpayer – which carries the cost.

Now it seems you have turned back into fiscal hawk mode, allowing endless chatter about tax hikes to seep out of No 11 ahead of the Budget next month. You too don’t seem able to resist the easy option of putting up tax, with more comments today that the UK’s finances need to be on a more “sustainable footing.” Code for tax increases.

You may be have a point, in the long-term, that some (modest) tax rises are needed to repair the public finances. Now is not the time to be planning tax raids on the rich, or indeed on big online players, or on anyone else. Instead, drop the doom and gloom language and start talking up the recovery which will take place naturally once this third lockdown ends.

If there is one way to kill any hope of recovery, it is tax rises. Who puts up taxes in a recession? That way lies economic madness.

There are good signs the UK economy is stabilising after the roller-coaster of the last year. It is true the deficit for January was £8.8 billion, the biggest since 2011, but nowhere near as bad as the £25bn originally forecast.

Retail sales in January were also dreadful, down eight per cent. Hardly a surprise, though, as who in their right minds was shopping for anything other than the bare essentials in the depths of January?

Do not fear. The British love to shop. They have stored away over £125 billion in the last year not in savings as such, but “spare” cash. They will start spending again once the Prime Minister gives us some clues on Monday as to how we find our way out of this lockdown.

Of more importance is business confidence: IHS Markit’s purchasing managers index (PMI) shows 49.8 for February, which was a two-month high. Markit’s private sector survey found expectations for the year ahead improved at the fastest rate in seven years, buoyed by hopes of a vaccine-led economic recovery later in the year.

The CBI Industrial Trends Survey also showed a brighter outlook. Although manufacturing output fell slightly in the quarter to February, it was at a more modest rate than last spring. Overall, output has picked up in 11 of the 17 sub-sectors.

Rather than tax rises, Rishi, you need to put rocket boosters under the economy: show more compassion by simplifying taxes, give more relief to debt-laden businesses for capital allowances and encourage low-tax enterprise zones so that levelling up is more than a sound-bite.

Chancellors, like doctors swearing on the Hippocratic oath, should promise to do no harm. Otherwise you might find that it is Sir Keir Starmer at the next election who will be campaigning, incredibly, as the leader of the low tax party.

Yours sincerely,

A self-employed, taxpaying, small business owner.

Jigging around the gig economy 

Britain’s gig economy is going to need a drastic rejigging following the Supreme Court’s ruling that Uber drivers must be treated as workers rather than self-employed.

The court’s decision could mean thousands of Uber drivers are entitled to minimum wage and holiday pay, and maybe even compensation.

Uber’s share price fell 1 per cent when Wall Street opened today on fears that the UK court ruling could set a precedent for other groups of drivers protesting in countries around the world.

Uber challenged the result, saying that most drivers took on work on a part-time, self-employed basis. One lawyer suggested that Uber might be liable to pay workers on average £12,000 in compensation, as well as sick pay and holiday pay.

What the case highlights is the complex nature of Britain’s employment law surrounding our 5.5 million gig workers, many of whom are genuinely self-employed and others who are deemed to be employed by one company. As IPSE – the Association of Independent Professionals and the Self-Employed – points out, employment law needs clarifying and defining.

The need for that clarity has been brought home hard by the pandemic; many of those who are genuinely self-employed have dropped through the cracks in the various furlough schemes. The government ignores them at its peril.

The split Crown 

When the statement finally came from Buckingham Palace it was both brutal and sad: the Duke and Duchess of Sussex will be stripped of all the responsibilities and duties that come with a life of public service.

Yet the Queen had no choice, as it is Prince Harry and Meghan who have decided not to return to the UK as working members. But even after deciding that they will not be returning from California, the couple still offered to keep up supporting the organisations they had represented.

That of course was out of the question. And it does seem extraordinary the Sussexes thought they could keep the glories that go with royal duties while not living here. Sadly, the couple could not resist a little dig in response to the Queen’s remarks about public service: “We can all live a life of service. Service is universal.” Ouch. Did they really need to say that? Sounds like something out of a Californian self-help journal. We can but wish them well in the sunshine state because if YouGov polls are anything to go by, most youngsters approve of their mini-abdication. And of course, they can stay in touch via Oprah. See below for more details.

Have a good weekend. In Reaction Weekend, sent to you tomorrow morning, there’s writing on sport, food, documentaries, travel (it will return), poetry and opera. Also look out for Helen Dale’s must-read piece on Australia audaciously “taking on the bar”, in its spat with Facebook, Covid and the Chinese Communist Party.
 

Maggie Pagano,
Executive Editor