The UK could have done without the IMF lecturing us this week on how there should be no more tax cuts.
Like many parties on the left of politics they seem to think all public spending is affordable and desirable, and all tax cuts are unaffordable and wrong.
They tell us to cut the deficit more and think you do that by taxing people too much if they dare to work hard or to save.
The UK needs tax cuts to grow the economy faster. It needs tax cuts to grow the tax revenues.
John Redwood criticised the Bank of England for buying too many government bonds at very high prices
PA
Taxing non-doms too much as Labour proposes will simply tempt them out of the country, meaning we end up with less tax revenue.
IR 35 taxes on the self-employed have helped lead to a big loss of people who will work for themselves, when more could offer the rest of us more choice and better service.
A low VAT threshold for small business stops many businesses growing as they do not want the hassle of VAT registration and returns.
Higher corporation tax means more companies base themselves in Ireland with much lower rates so we get less to tax.
I have gone hoarse trying to explain to the Treasury that some lower taxes bring in more revenue.
There is an even easier way to get a bigger set of tax cuts. That is to stop wasting and losing money on an industrial scale.
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Taxing non-doms too much as Labour proposes will simply tempt them out of the country, claims John Redwood
PA
Enter the Bank of England. The Bank bought too many government bonds at very high prices, particularly in 2021 when some of us said it was going too far.
Now they are scrambling to sell them at huge losses when there is no need to. They sent a bill for £49billionn to the taxpayer for their losses to date, and plan to send us another whopper, maybe £40bn for the current financial year. We cannot afford this and it is easy to cut the losses down.
They should follow what the European Central Bank is doing. They too bought too many bonds at very high prices. They are just holding the bonds until they fall due for repayment.
This means much lower capital losses than the Bank of England selling them prematurely at depressed market prices.
It is also true that just holding them produces a lesser loss because the Bank of England pays commercial banks the full Base rate on their reserves that finance the bonds.
The ECB has changed that, paying nothing on minimum reserves and having a lower deposit rate than the base rate.
Why doesn't the Bank of England copy that? The Bank paid nothing on reserve deposits prior to 2006.
The Bank of England is independent of the government in setting the Base rate and managing inflation. It acts as the agent of the Treasury on the bond portfolio.
Every pound of bond bought needed the signature of the Chancellor of the Exchequer to approve the purchase volume, and every pound of bond is indemnified against loss for the Bank by the Treasury and taxpayers.
As we pay the bills the government should tell the Bank to stop selling bonds at huge losses and follow the ECB over reserves. That way we could have tens of billions to spend and to give back as tax cuts.
This would promote growth, raise confidence and cheer everyone up. Big losses by the Bank should not be our number one spending priority.
