Tom Harwood: Rishi Sunak's budget needs to deliver growth

'Spurring business and growth is the only sustainable way to pay for public services, and pay down our debts'

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Next week is budget week.

Rishi’s autumn budget will be delivered on Wednesday and already people are getting nervous.

The Confederation of British Industry is today warning the Chancellor against any further clobbering of British business, particularly with yet more taxes.

I have to say I’ve not always agreed with the CBI, but here they are absolutely spot on. We are charging towards our highest tax burden in more than half a century.

Individuals are shortly to see the state pinch more from their pay packets, and businesses will face higher corporation tax too. And ultimately corporation tax does not hit the legal fiction of a corporation.

What is a corporation after all? Corporation tax falls on salaries, on investment, and on prices. Lower salaries, lower investment, higher prices.

Most concerning of all, that means lower growth. The state has borrowed over 300 billion pounds. The sort of money that is almost impossible to imagine.

It’s like spending several NHS’s all at once. There is no magic money tree, this gargantuan debt has to be paid back.

And – perhaps counterintuitively – deploying tax rises, here or there simply cannot raise the cash required. The entire tax take of the UK this year is expected to be around 550 billion pounds.

The way you grow that isn’t by jacking up taxes further, it’s by growing the economy. The brutal truth of the matter is that the state has always struggled to achieve a tax take that is much above 35% of GDP.

Whatever the tax rates. Even in the dark post war days of incredibly high taxation, the state never was able to match tax take to their tax rates.

Ultimately tax rises change behaviour and shift investment patterns. We understand this in the context of so called sin taxes. We want less smoking, so we tax it. The state wants less alcohol consumption, so that’s taxed too. The state wants less sugar so that is taxed as well.

And in exactly the same vein, what do business taxes mean? Less business. What do income taxes mean? Less income.

A big state, high tax, high prices economy is categorically not the way to pay back the pandemic costs.

When he stands at the dispatch box next week the chancellor has to have one theme running through everything he does. Growth. Growth. Growth.

We are staring down the barrel of an incredibly grim recovery. High taxes, worker shortages, and – deeply concerning - high inflation: itself a stealth tax that eats away at people’s savings.

Time to return to the old orthodoxy. Spurring business and growth is the only sustainable way to pay for public services, and pay down our debts.

Tax rises risk doing precisely the opposite.