Jeremy Hunt’s plans to boost defence and slash corporation tax would cost £28billion, an economic think-tank has found.
The Institute for Fiscal Studies said his plans would ‘exacerbate’ pressures on public finances.
Cutting the main rate of corporation tax to 12.5 per cent would cost £13billion a year in the short term.
The Institute for Fiscal Studies has said Jeremy Hunt’s plans to boost defence and slash corporation tax would ‘exacerbate’ pressures on public finances
And an additional £15billion would be spent on the defence budget in four years’ time as a result of Mr Hunt’s pledge to increase military spending to 2.5 per cent of the national income.
The IFS analysis says Mr Hunt’s proposals would ‘amplify the long-run challenges’ to the public purse, with the UK facing spending pressures from an ageing population and rising health costs.
The report adds: ‘Mr Hunt’s combination of policy proposals would exacerbate these pressures and widen a gap in the public finances that will ultimately need to be filled through some combination of higher borrowing, tax increases or cuts to other areas of spending.’
Mr Hunt has pledged to ‘turbo-charge’ the economy, partly in a bid to apply pressure on the EU during any post-Brexit trade talks.
The corporation tax cut from the current level of 19 per cent would not pay for itself because it is ‘too big for it to be plausible’ that higher profits could outweigh revenue losses.
But reducing it to the level of Ireland’s tax could eventually cost less than the prediction as it would ‘probably’ encourage greater investment in the UK, the report says.
According to the reports, cutting the main rate of corporation tax would cost £13billion a year in the short term and an additional £15billion in the long-term
Mr Hunt, who is battling Boris Johnson to become the next prime minister, has proposed to increase defence spending by a quarter over five years from the current 2 per cent, to show ‘Britain is back’.
IFS director Paul Johnson described this as a ‘radical’ measure, adding: ‘A £15billion increase, alongside the proposed corporate tax cut, would leave no scope to relieve the pressure on other areas of public spending without tax rises or a fiscal stance which risked putting debt on a rising path.’
The think-tank also suggested Mr Johnson’s pledge to give a tax cut to earners on more than £50,000 would cost £9billion and mainly benefit the top 10 per cent of earners.
Kaugnay na mga post: