'Tax cuts deepen recession': Former Tory leader warns against autumn budget hikes

Conservative former leader Sir Iain Duncan Smith says there will be “deep concern” in his party if Rishi Sunak raises taxes next week as part of the autumn statement.

Speaking to Sky News’ deputy political editor Sam Coates, the senior backbencher said it is “pretty clear” there will now be a recession in the UK.

But he warned ministers that if they “try and hammer us too hard with tax rises, they will actually drive us deeper into recession” – also meaning poorer prospects for the Tories at the next general election.

Instead, he called for Mr Sunak and his Chancellor Jeremy Hunt to bring in policies that “make sure the economy grows”, and to look at “normal” spending reductions on departmental budgets, while protecting the most vulnerable.

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Mr Hunt will present the statement to the Commons next Thursday as the new government seeks to fill the fiscal blackhole in public finances, estimated to be as high as £60bn.

A number of rumours have been circling around Westminster over what projects could be facing the chop, and which taxes could be increased.

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But the Treasury and Number 10 have refused to comment on speculation.

Asked what concerned him most, Sir Iain told Sam Coates: “We have to get growth. We are going to go into recession, that is pretty clear now, and the question now is how deep the recession goes.

“If its deep and we don’t emerge until 2024 or even 2025, our electoral chances are pretty slim. If worklessness rises, if people’s incomes go, if they cant pay their mortgages, these are very difficult things for them… so [the government] have got to do what they can to get us back into growth very quickly.”

‘Big problems’ for Sunak

Sir Iain, who led the Tories between 2001 and 2003, said raising taxes would be counterintuitive to achieving growth and the deficit “would actually grow, not shrink”.

However, he accepted the PM had “big problems”, adding: “He is going to have to look for spending reductions, spending cuts, a lot of them departmental – that’s normal – and after COVID, there are probably some areas that he can go to.

“But he also has to protect other areas like people on very low income, on benefits and those on pensions, so those ones are probably ruled out to him.”

So what would the party’s reaction be if ministers went with tax hikes instead?

“It will be deep concern if we go over the top on tax rises because, as I say, it is absolutely a fact of life that tax rises will make the recession deeper,” said Sir Iain.

“It wont go down particularly well because many people and economists too think it will be a [problematic] decision to make. I think he has got to focus on finding the spending [cuts].”

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