The spring budget will be revealed later today
Patrick Minford, Professor of Applied Economics at the Cardiff Business School, has said the government needs to cut taxes if it wants to grow the economy after Jeremy Hunt said he needed 'to be prudent like Gordon Brown.'
Speaking to Sir Jacob Rees-Mogg, Prof Minford warned rules used by the Treasury to decide on tax policy were ‘doing the exact opposite of what they’re supposed to do’ as he said that the country's economic troubles started 'from the Gordon Brown period of free spending.'
Speaking on GB News, Professor Minford said:
“The fiscal rules are nonsense because they're doing the exact opposite of what they're supposed to do, which is create fiscal solvency and long term debt security.
“To get debt ratios coming down, you need growth and what the fiscal rules are doing is stopping growth with all this headroom discussion, because the economy's in a recession, so there's no money.
“Instead of thinking long term about how we get growth and therefore improve the prospects long term of getting the economy going they're using these very short run fiscal rules which are destroying Jeremy Hunt’s budget.
“[The OBRs’] record of forecasting is poor, but it's worse than that, because they don't model the effects on growth of things like the marginal tax rates. Those destroy growth, and they don't cost very much.
“Nor does [cutting] corporation tax cost very much, but it's very important for growth.
“Instead of modelling what we know from research, which is that these lower tax rates bring in growth, which then solves the fiscal problem, they don't model it at all. They regard growth as completely as manna from heaven that they can't model.
“Corporation tax is also very important for growth because it affects business incentives to invest and to innovate. That's absolutely at the core of growth, as are all these marginal tax rates which hit entrepreneurs that would innovate and invest particularly hard: it destroys their incentives.
“All our troubles really start from the Gordon Brown period of free spending and raising of the top marginal rate of tax, essentially as a trap for the Conservative Party because they find it very difficult to bring it down.
“If they hadn't been so mealy mouthed about it, they could have said that this is a key element in the growth equation, and we've got to bring that down as a high priority. It brings in revenue.
“Marginal tax rates at those religious levels bring no revenue at all so ironically, it's costless to get rid of them.”
WATCH CLIP ABOVE FOR MORE
