Tame Spending And Inflation...Then We Can Afford Tax Cuts

Addressing Labour’s annual conference in 1976, Prime Minister James Callaghan was in no mood to indulge his audience. The delegates were to be given a dose of reality rather than a bromide of sentimentality.

- Leo McKinstry

Against the backdrop of soaring inflation, union discontent and stagnant growth, he told them that “the cosy world of tax cuts and deficit spending” was no longer an option. “In all candour,” he added, Britain can not “go on paying ourselves more than the value of what we produce”.

Callaghan’s lecture did not go down well with the activists, who refused to give him a standing ovation. But he was telling the truth, and his warnings are just as pertinent today for the Tories as they were almost half a century ago for Labour.

As Boris Johnson’s Cabinet struggles with economic problems and dwindling popularity, pressure is cranking up within the Conservative Party for major tax cuts. Led by figures such as the former EU negotiator Lord Frost, this chorus of slashers sees such an approach as the magic bullet to end the Government’s woes.

A big reduction in taxation would not only ease the cost-of-living crisis by boosting incomes and incentivising enterprise, but would also revive the party’s political fortunes.