by Peter Franklin
Wednesday, 27
October 2021
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16:30

A tax-cutting budget without tax cuts

Rishi Sunak played a trick at the despatch box
by Peter Franklin
Credit: Getty

The Chancellor turned up to the Commons today with his Red Box, from which he produced a remarkable innovation: a tax-cutting Budget without actual tax cuts. 

Rishi Sunak admitted as much himself. Government spending and taxation were at very high levels because of the response to Covid. He didn’t like it, but he wouldn’t apologise for it. The tax burden would go down eventually, but not until the end of the current Parliament.

And yet Sunak ensured that his 2021 Budget would be remembered for tax cuts — or rather the impression of tax cuts. For instance, there’ll be lower duties on draught beer, fruit ciders and — in a concession to hun culture — sparkling wine. However, these were offset by increased rates on stronger drink.  

Other ‘tax cuts’ were, in fact, the cancellation of previously planned tax rises — on fuel, for instance. The final flourish had been pre-announced: we were already expecting the Chancellor to cut the rate at which Universal Credit is withdrawn as people earn more. The traditional twist was that the cut was bigger than we’d been led to believe.

Strictly speaking, this wasn’t a tax cut either — and certainly not if one takes into account the end of the £20 boost to UC. The same goes for the increase in the National Living Wage, which is paid by employers, not the state. 

However, Sunak did his best to position all these measures within a coherent philosophy. He stressed that Government cannot be the answer to every problem — the rest of us have to contribute to the recovery too. There’ll be cuts to benefits, but boosts to take-home pay. Corporation taxes are still heading up, but there’ll be more tax relief on investment. As for Air Passenger Duty, the burden will shift from domestic to long haul flights. 

You could just make out what he was trying to do: gradually realign the policy framework in favour of things that most directly grow the British economy. But as for tax cuts, it was just more Rishi magic.

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