Ken Clarke tells Rachel Reeves to raise income tax in her budget
Former chancellor Lord Ken Clarke warned that Rachel Reeves’ “catastrophic malpractice” in allowing her budget to be released before it was delivered was “creating a mood of gloom over the economy”.
The respected former chancellor also called on Ms Reeves to reconsider her decision not to raise income tax and instead increase it by 2 per cent.
Lord Clarke helped the UK economy recover after the pound left the European Exchange Rate Mechanism following Black Wednesday in 1992. He offered his advice to the current chancellor, who is facing a potential economic crisis, in an interview on Radio 4’s PM program on Monday (November 17).
Of the numerous briefings on potential new taxes, the plan to raise income tax and the subsequent decision to cancel that increase, he said: “In my time there was something we called a strange name – budget purdah – and a month or two before the budget, it was a kind of death sentence for any minister, political adviser, civil servant, to say one word about what might be in the budget. It would certainly mean the immediate end of any career.”
He then continued: “Parliament has been snubbed by successive governments who always make announcements to outside newspapers first, chasing them before they make the announcement. More importantly, it disrupts markets, affects confidence, people try to make money from follow-up announcements about what to do.”
He added: “His pursuit of all sorts of things has created an atmosphere of gloom over the entire economy.”
Ms Reeves is currently examining a range of wealth taxes, including a mansion tax on homes worth £2 million or more, and a gambling tax or bank tax to fill the gap in spending plans now believed to be £20 billion.
Asked what he would do with this budget, Lord Clarke said: “I am bracing myself for a deeply unpopular budget, focusing on getting out of the acute economic crisis we are in, particularly tackling the fantastic debt burden that this government inherited but added in its first budget.”
“That means putting on your tin hat, abolishing taxes, cutting public spending, bracing yourself for the backlash, making it clear that you’re doing this to get back to the low-inflationary growth we hope for in two or three years and better prospects for families whose living standards are currently falling,” Lord Clarke said.
Asked what tax he would raise, Lord Clarke said: “I’m very reluctant to raise income tax, it was too high in my day, I cut it. But now I’m thinking of at least a penny in income tax, maybe a tupen. That’s the fairest, basic tax. I’m torn between that and VAT.”
