IT’S been a good week for PM Rishi Sunak and the Government.
On Monday he announced the Windsor Framework, his new deal with Brussels to address some of the worst friction arising from the EU’s hardline interpretation of the Northern Ireland Protocol.
No solution to the situation in Northern Ireland is going to be perfect, and Brexiteer MPs like me are still going through the detail to make sure it will allow us to take full advantage of our Brexit freedoms — as well as offering meaningful protection for Unionists.
But by any fair-minded measure, Rishi’s deal has secured important practical easements.
It has exceeded everyone’s expectations and he deserves big credit for getting the EU to move in the way it has.
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Now our focus turns to the Budget on March 15.
This is a key moment for the Conservatives.
We need to show that we are a government that can not only tackle the cost of living, but also deliver the growth our country needs to raise living standards.
Right to hold firm
Inflation is a silent thief that makes everybody poorer, and the Government has been right to hold firm in the face of union demands for pay increases of up to 19 per cent.
If we give way on this, not only will everyone’s taxes rise, but inflation will stay high for longer than it needs to.
At the moment there’s good reason to think the Government will hit its target of halving inflation this year, helped by the shock of Putin’s war easing as supply chains adjust.
But we need to do more on the growth side of the ledger.
Chancellor Jeremy Hunt rightly wants to make this a priority, and recent positive data on the economy gives him more headroom than expected to do just that.
There are some low-hanging fruit he should definitely go for, including extending support for hard-pressed motorists through a freeze on fuel duty.
An eye-watering rise of up to 12p could be whacked on the price of a litre of petrol and diesel if the Chancellor scraps the fuel duty freeze — a White Van Man tax is the last thing we should want.
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We should also help the self-employed by reversing changes to the IR35 tax legislation that were made in 2017 and 2021.
If we want more people to set up their own business, action here would be hugely positive.
Scrapping IR35 was the most popular thing Kwasi Kwarteng pledged in his Budget in September, but this decision was then reversed again the next month.
Treasury sums show doing this would cost about £1billion in the first year — but there are good reasons to think it would actually BOOST tax receipts by encouraging more people to take the plunge.
We could also tackle NHS pressures by raising the lifetime allowance for pension savings.
The level this is set at directly incentivises desperately needed GPs to retire in their mid-fifties, which is totally counter-productive.
Then there is the big one.
Grasp the nettle
Corporation Tax is set to rise from 19p to 25p next month.
A tax hit for companies is also a hit to jobs and growth and we have recently seen medicines giant AstraZeneca choose Ireland over the UK for a new facility explicitly because of the higher tax rates here.
Ireland’s corporation tax rate is 12.5 per cent — it simply doesn’t make sense for us to have a tax rate that is double that of our neighbour.
There is still time for us to think again about this tax hike — even if it means adjusting some of our public spending plans.
We also have to challenge economic models that fail to reflect the positive impact of lower tax rates in attracting new investment to the UK.
Looking beyond the Budget, the Government needs to come back to the vital question of building the homes we need.
Every 100,000 homes we build adds one per cent to our GDP, yet we have just seen warnings from the Home Builders Federation that housebuilding in England is set to fall to its lowest rate since World War Two as a result of changes to planning policy and over-strict enforcement of environmental regulations.
We should tackle bonkers EU legacy problems such as the “nutrient neutrality” rules that are stopping up to 100,000 homes — where planning permission has already been granted — from actually being built, in whole areas from Darlington to the Solent.
This is happening in the name of stopping water pollution — but the main culprits there are our water companies and bad farming practices.
Suspending the relevant bits of the Habitats Regulations and bringing forward the deadlines for proper action on water pollution is the way to break the logjam.
And we need to work up a credible plan to actually build more homes.
The Government needs to grasp the nettle and create positive incentives for communities to welcome new homes — otherwise house prices and rents will continue to soar out of reach for too many ordinary people.
Together, these measures would represent a package to turbocharge growth, and make our whole country better off.
- Simon Clarke is the Conservative MP for Middlesbrough South And East Cleveland, and served as Chief Secretary to the Treasury under Boris Johnson and Housing Secretary under Liz Truss.
