Quizzing the PM

Recently the Prime Minister gave evidence to the Liaison Committee - the committee of Select Committee Chairs. As Chair of the Treasury Select Committee I led the questions on the economy.

My focus during the virtual discussion was on four points. Firstly, what the Government’s long-term economic plan looks like given the massive impact of the coronavirus pandemic on the nation’s finances.

It is inevitable that there will have to be more borrowing but also increases in taxation to maintain current levels of public spending and cope with a smaller economy. Secondly, I highlighted the disproportionate affect that the pandemic has had on young people – with more young people losing their jobs, seeing their income decrease or reporting a deterioration in their mental health, compared to other age groups – and urged the PM to specifically look at measures during the recovery to support them.

Thirdly, I asked about whether the Government’s manifesto commitments still stood, such as retaining the triple-lock on the state pension (so it rises by the greater of inflation, earnings or 2% each year). Finally, I asked the PM whether he would specifically look at the plight of self-employed workers who take their income as a dividend on their profits rather than through a regular salary and so are not qualifying fully for the Government’s furlough scheme.

HMRC has previously stated that addressing this issue would be too complicated. Before asking this question I welcomed the substantial measures the Chancellor has put in place to support both employers and employees whilst pointing out that inevitably with measures on such a vast scale and given the speed of their implementation, gaps in support have arisen .

You can watch the PM’s full response to each of these points at www.parliamentlive.tv/Commons. He was clear that the Government’s immediate focus has to be on controlling the spread of the virus and that announcements on long term spending, taxation and borrowing will come in due course. He confirmed that all manifesto commitments would be maintained which includes keeping the triple-lock for pensions and not raising the rates of Income Tax, VAT or National Insurance.

The latter manifesto commitments are going to be something of a stretch in my view given the fact that the structural deficit will have increased significantly as a result of the crisis. If we are to continue to be able to borrow at low rates then the markets will require a clear and credible plan for bringing the deficit down. With a smaller economy and a struggle to increase productivity and provide growth that will surely require some tax rises and those such as Income Tax, National Insurance and VAT are the three broad based ‘heavy lifting’ taxes and so cannot really be ignored when it comes to seeking serious revenue raisers. I do not envy the Chancellor the difficult choices that he will have to make over the coming months.

For more from Mel follow him on twitter @MelJStride or visit www.melstridemp.com.

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