The BBC Radio 4′s Justin Webb just called out a minister over the government’s messaging around tax cuts.
At the weekend, the Treasury’s “largest ever cut to national insurance” kicked in as it decreased the amount employees pay each month from 12% to 10%.
However, the government also recently announced it was freezing personal income tax thresholds until 2028 – which, due to fiscal drag, will mean more households will end up paying more income tax over time.
Speaking to Bim Afolami, the economic secretary to the treasury, on the Today programme, Webb asked: “Are we at the beginning of an effort to convince people that taxes are coming down, personal taxes?”
Afolami replied: “Not just convince people, Justin, taxes are coming down. For the average earner earning £35,000 a year, they will be £450 better off because of this. Taxes are actually coming down.”
“Hang on a second – one tax is coming down,” Webb noted. “But, as you know perfectly well, thresholds are not coming down, and actually the effect of what the chancellor is planning to do over the next six years or so, with the freezes to income tax allowances, with the thresholds, is going to raise a lot more in taxes than he is giving away with his national insurance [cut].”
The minister replied: “Well, look – we had to spend over £400 billion helping protect people as a result of the pandemic, we don’t make apologies for that and that money had to be paid back.
“But what we’re doing now – this isn’t the end – we’re beginning the process, the national insurance cut is about 16% – beginning the process of ensuring that more people get more of their hard-earned money back to them.”
He said the government were looking to do so in the upcoming spring budget.
The minister continued: “This is the beginning of that process.
“We are going to get things back into balance. We’re only able to do that because we’ve carefully managed the economy, carefully managed the fiscal position, and indeed brought inflation down.”
His remarks came shortly after findings from the Trades Union Congress suggested Brits are facing the worst decline in living standards in the G7.
Webb then quoted from the director of the Institute for Fiscal Studies (IFS), Paul Johnson, who claimed the government presents these as tax cuts by not talking about the impact this is having on public spending – and “planning another period of austerity”.
Asked if this was a fair assessment, the minister said: “It’s not fair and let me explain why – over the course of this parliament, funding for public services will be up in real terms, so after inflation, considering the high inflation we had a couple of weeks ago, by 3%.
“So it’s not fair, to say this is some sort of period of austerity now. That’s not true.”
Webb replied that austerity may still have to happen in the near future, because “something has to give” if the government wants to deliver on its promised tax cuts.
Alofami said the autumn statement and the 2023 budget oversaw the “biggest upgrade in terms of economic growth” that the OBR has ever managed.
He said it was “wrong to say” what would happen in five years time because the chancellor will re-evaluate the fiscal situation for every fiscal event.