A BREXIT bonanza will open the door to big cuts in personal and business taxes, according to analysis of the UK economy by experts who have consistently bucked inaccurate forecasts prepared by gloomy Whitehall officials.
Ahead of the Chancellor’s Spring Statement on Tuesday, in which he is expected to admit for the first time that Brexit is not the disaster long predicted by his officials, leading figures from Economists for Free Trade (EFT) insist Mrs May will soon be able to ditch austerity and embrace tax cuts and public spending.
EFT, which correctly predicted the Treasury and the Office for Budget Responsibility would have to revise their figures, says from 2020 the Treasury will have a surplus of more than £25billion a year and rising to play with.
This would enable a two per cent cut in both the 40 per cent top rate of tax and in corporation tax on business profits. It would also create scope for a cut in the punitive “supertax” rate of income tax of 45 per cent.
At the same time, the Government would have an extra £14billion a year to spend on boosting spending on public services such as the NHS and schools.
The “Budget for Brexit Update” report says that previous EFT forecasts debunking “Project Fear” projections remain on track while not threatening debt reduction targets. It says: “Our post-Brexit forecast would get our finances into reasonable shape by 2024, permitting the Government to start spending more beforehand without endangering progress to a 60 per cent target by around the middle of the decade.
“One per cent of GDP per annum could therefore be spent additionally from the 2020 financial year over the succeeding five years, while still reaching a 60 per cent debt/GDP ratio in around 2026. This amounts to about £135billion.
“Therefore, beginning from the date of Brexit in 2020, some £25billion extra spending a year could be accommodated, while still reaching the 60 per cent debt/ GDP target by the end of 2025.”
Looking further ahead, this £25billion a year Brexit windfall would rise to £65billion a year after 2025 while also enabling reductions in the debt target.
The EFT report sets out the widening scope for tax cuts and spending rises as the economy expands after full exit from the EU in 2020, adding: “From the viewpoint of supply-side incentives, corporation tax and the two top rates are the highest priorities for tax-cutting.
“If corporation tax and the top rate were both cut by two per cent in 2025, along with the 45 per cent rate, the cost would be of the order of £11billion. Together, with additional spending of £14billion, a ‘Brexit dividend’ from 2020 of £25billion would begin to reduce the strains in the public sector and also give a useful boost to competitiveness.
“From 2025, the further dividend of £40billion per annum could be taken. At this point, the standard rate could be cut by two per cent, at a cost of £11billion, corporation tax could be cut another three per cent, costing another £10billion, the top rate could come down by two per cent, costing around £3billion. The remaining £16billion could be used on spending.”
Commenting on the report, economist Roger Bootle said: “The UK economy continues to confound all those pessimistic forecasters who saw gloom and doom descending on us after the Brexit vote – and that amounts to nearly every official forecasting organisation, but notably not EFT.”
Professor Patrick Minford, chairman of the Economists for Free Trade, said: “The UK economy is doing extremely well following the Brexit vote and there are huge economic opportunities that are only possible because of the vote to leave the EU.”
International Trade Secretary Liam Fox will travel to Washington this week for urgent talks over Donald Trump’s plan to slap a tariff on steel imports which would be “utterly devastating” to the UK industry.
The Cabinet Minister will meet US Trade Representative Robert Lighthizer, where he will press for exemptions from the new levies on imports.
Dr Fox has said it would be “absurd” for the UK to be hit by the tariffs.