With Ireland forecasting a budget surplus of just under £9bn this year, the equivalent of 3.5% of national income, free UK news agency, Newspage, sought the views of financial services experts and business owners on whether Liz Truss’s headline policy of ultra-low corporation tax rates, like Ireland, could have benefitted the UK, where corporation tax is now 25% — if the execution had been better.
“Looking back, it is possible that the baby was thrown out with the bathwater, and that Trussonomics wasn’t entirely bonkers after all”, said Daniel Wiltshire at Bradford-on-Avon-based Wiltshire Wealth, adding, “Corporation tax certainly does feel too high if the economy is ever going to return to meaningful growth, and with personal tax thresholds remaining frozen, we’re arguably now on the wrong side of the Laffer Curve.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial, was broadly in agreement, “Truss’s headline policy of reducing corporation tax to incentivise big business to relocate, or just to stay, in the UK was fundamentally good.
“Ireland has shown that this generates more tax income that you can choose to spend for the social good. However, she tried to do too much too soon and didn’t have the economic forecasts to back up her plans. Truss needed to implement one key policy, rather than setting all tax rates on fire.”
David Robinson, co-founder and wealth manager at London-based Wildcat Law, agreed that the problem was poor execution, but also noted the impact of Brexit.
Robinson said, “Growth was, and remains, the only way out of this mess. Truss had the right idea but her execution was abysmal. She mixed a number of actually quite sound policies with others that were frankly not only unpalatable but also undermined the viable ones.
“Lowering tax for the wealthiest in society whilst effectively raising it for the poorest was never going to fly. However, comparing us to Ireland on the corporation tax front ignores that big Brexit elephant in the room. Ireland has received a significant boost from Brexit, which the lower corporation tax rates merely supply the icing to.”
Meanwhile, for Philip Dragoumis, owner of London-based wealth manager, Thera Wealth Management, “the reason the Trussonomics experiment failed miserably was not its obsession with low taxes as such.
“It was the combination of low taxes, high spending and a complete disregard for any fiscal orthodoxy and even interest in ever balancing the books. Thatcher, who Liz Truss admired, was primarily a fiscal conservative and would have turned in her grave.
“If Liz Truss was still in power, mortgage rates would likely be at 10% and we could even have seen a situation where the Government was unable to borrow money and meet its obligations, which would have resorted to asking for a bailout from the IMF.”