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This week the chancellor Philip Hammond has said the improved state of Britain’s finances means the Government now has the economic flexibility to cut taxes, but warned Tory leadership candidates not to wreck the party’s reputation for fiscal responsibility. Mr Hammond told MPs during Treasury questions in the Commons: “We can choose to support additional spending on public services. We can choose to reduce the deficit more quickly. We can choose to invest in Britain’s future. Or we can choose to cut taxes on ordinary working families,” he said. “Having the luxury of choice is something this country hasn’t seen for a decade.”

The Chancellor’s comments come after Tory leadership hopeful Dominic Raab pledged to reduce the basic rate of income tax by 5p – a blatant push for popular support.

However, can cutting taxes be seen to be a sensible strategy? Clearly the Chancellor wants to keep middle England on side amidst the turmoil of Brexit, but surely in such circumstances it would be wiser for us to maintain tax levels and possibly accumulate a fighting fund to deal with the likely financial issues when EU funding ceases? It would be rather like paying off the mortgage because you can, and then finding soon after you have to go to the bank again to borrow to get the roof repaired. Also, the word from the Civil Service is that there is going to be a huge bun fight between departments over funding when we have left the EU, and there is not enough to go around.

On the flip side, the Institute for Public Policy Research (IPPR) says a 2% income tax rise could pay for free care for the elderly at home. Making this element of social care free at the point of need would cost an extra £8bn a year by 2030 but would save the NHS £4.5bn a year and improve the health and independence of older people. IPPR researcher Dean Hochlaf said:

It’s a small price to pay.

Well there you have it, the case for both sides with ‘no right answer’ smack in the middle. Which side are you on?

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