eIt depends on the people in the middle. The same goes for Jeremy Hunt’s fall economic statement this week. In the space between Manifesto’s modest increases in personal taxes for the richest on the one hand, and his increased support for the poorest on the other, Thursday’s package was marked by significant pressure to raise revenue over the living standards of many millions in the middle. This represents one of the biggest political gambles any government can take in modern times, and all the more significant because this is the same government that helped create the very problem it is now struggling to solve.
This large group of taxpayers and voters has gone by many nicknames over the years – among them Middle Britain, embattled middle and embattled middlemen. Not everyone who falls into any of these categories thinks of themselves in the same ways, and there are certainly many great discrepancies in wealth and standards of living between them. In terms of personal finance, it stretches all the way from anyone who will now lose their cost of living target for heating costs from April, to those whose incomes will be pulled into higher tax bands in future years as a result of the allowances freeze.
These freezes add up to a very large tax hike across the whole swath of middle income earners, and very hard times. They will, according to the Office for Budget Responsibility, raise a total of £35 billion by 2027-28. It comes as the Office for Budget Responsibility expects living standards to fall by 4.3% in the current financial year, the largest drop since the 1950s, and again by another 2.8% in the following year. They also come at a time when food and fuel prices have risen sharply and when year-on-year inflation has reached 11.1%, the highest figure in more than 40 years, ensuring that the public is really getting less money. Terms of payment for the goods themselves.
Politically, this is a very unusual move. Partly because these are desperate times – especially for the poor – and desperate remedies are in order. Yet it is also because in Britain rational public conversations about raising taxes to deal with need, even in less extreme circumstances, have all but died out.
For at least 40 years, UK governments of all classes have feared putting more taxes on the middle class. Labor is almost as cautious as the Conservative Party. As a result, taxes on wealth or land became taboo, not just taxes on income. Now, however, the Kwasi Quarting car accident from tax cuts has put these issues back on the agenda of all political parties.
There is little mystery as to why Mr. Hunt intended to reduce living standards in Middle Britain despite the inevitable unpopularity of his work. There are currently more than 30 million income tax payers, of which more than 6 million are now paying the top rate. Thus, the Middle British taxes raise a lot of money for the treasury and do it efficiently. Hunt’s dilemma is that all of these taxpayers also have votes.
Indeed, the chancellor came a little closer than some of his predecessors had in dealing with Central Britain. But in the end he shied away from making a sustainable public case for necessary taxation. On Thursday, he spoke of empathy and fairness, then declined to explain how the tax system is a key part of achieving them. Admittedly, this is a tall order in a party that has long been—and still is—slave to the doctrine of tax cuts and small government. But it is a conversation that has been pushed into the Tory Party by a combination of Brexit, Covid, energy prices and Liz Truss. It’s a conversation the country has needed for decades.
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