The Telegraph, July 16, Professor Patrick Minford
Former Chancellor and Conservative leadership front-runner Rishi Sunak claims he would run the economy like Margaret Thatcher if he is elected prime minister, by prioritising cutting inflation. “We will cut taxes and we will do it responsibly,” he said. “That’s my economic approach. I would describe it as common sense Thatcherism. I believe that’s what she would have done.”
As one of Mrs. Thatcher’s advisers in those days, I cannot agree with him. Mrs Thatcher did not wait to cut taxes, she cut them immediately in the 1979 budget. It is true that in the 1981 budget taxes were raised by not indexing income tax thresholds to inflation. But marginal tax rates were not raised; there was no rise in NICs or in corporation tax such as Mr Sunak has proposed. It is also true that in 1981 fiscal policy was tightened sharply to combat inflation. But the circumstances were quite different from today. There was no independent Bank of England with an inflation target so the fear was that the government would print money to finance its deficit. Today, money printing is in the Bank’s hands. In fact these days, keeping NICs and corporation tax down boosts supply, which helps reduce inflation as the Bank tightens monetary conditions.
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