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October 17, 2022

The Telegraph – Jeremy Hunt has saved the day, but he must not lurch into austerity overkill

The Chancellor warns us that spending cuts are coming. He should be careful how far he pushes this. I question the wisdom of letting corporation tax rise to 25pc, one of the highest levels in the OECD, at a time when the UK’s chief economic weakness is lack of investment, although I can understand the political reasons for doing so.

When modellers claim that it will raise £18bn a year they are engaged in bogus quantification. They cannot possibly know all the conflicting variables, or the shape of the Laffer Curve.

The Centre of Economics and Business Research says two stealth mechanisms give the Government £60bn more to play with over two years than headline borrowing figures suggest. One is the freeze in tax thresholds. The other is holding down public sector pay rises below inflation.

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