Tory leadership contenders tussle over tax

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12th July 2022

Bite-sized business news from the UK and beyond

Good morning Imagine working at a company for decades and all you get is a backpack, cinema ticket and Starbucks cup? Well that’s what happened to a Burger King employee recently given a stingy giftbag in recognition of 27 years of loyal service. His daughter thought he deserved more and, with the internet’s help, she’s raised over $300,000.

Today's stories

Tory leadership contenders tussle over tax
Sri Lankan leaders vow to stand down as economic crisis deepens

POLITICS
Tory leadership contenders tussle over tax

What happened?
Yesterday the process for choosing a new Conservative Party leader and prime minister was announced with a winner chosen on 5 September. There are currently 11 candidates in the running for the top job with tax policy emerging as one of the key battlegrounds.

The UK is set to have its highest tax burden since the 1940s
The policies of the current government of raising corporation tax, freezing income tax thresholds and a new health and social care levy means that total tax as a % of GDP is forecast to reach 36% by 2025, a level not seen since World War II.

Last week the Office for Budget Responsibility warned that the UK’s public finances are on an ‘unsustainable’ trajectory with government debt predicted to treble in the next 50 years driven by an ageing population, inflation and lower government revenue from fuel duty.

Amid the cost of living crisis, candidates are keen to win over voters with tax cuts to boost consumer spending power and kickstart economic growth.

Among the tax pledges are:

Foreign Secretary Liz Truss – start cutting taxes from day one and cancel a recent increase in National Insurance
Former Health Secretary Sajid Javid - cuts to income tax, National Insurance and fuel duty
Chancellor Nadhim Zahawi - cut income tax by 2p within two years funded by a reduction in government spending
Former Health Secretary Jeremy Hunt - reduce corporation tax and a business rates holiday in the most deprived parts of the country

Yes, but: critics argue that the UK economy isn’t in a position to cut taxes without serious cuts to public spending. Also with inflation running at close to 10% - way above the Bank of England’s 2% target - increasing household income could stoke it even further by pushing up the demand for goods and services.

Other stories to keep you in the loop

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Energy bills to rise more than predicted, says Ofgem boss
Ex-ASOS CEO to take reins at Matchesfashion
Twitter lawyers up to sue Elon Musk over broken buyout deal
Former F1 boss charged with fraud over £400m assets
Online parking platform Your Parking Space sold for £120m

GLOBAL
Sri Lankan leaders vow to stand down as economic crisis deepens

What happened?
Sri Lanka’s top two leaders pledged to resign over the weekend amid mass protests, which saw demonstrators storm and occupy the presidential residence.

How did we get here?
The country of 22m people has been gripped by an economic crisis driven by a series of policy blunders like unfunded tax cuts, significant public spending and a pandemic-induced drop in tourism revenue. Sri Lankans have faced severe shortages of food, medicine and fuel among other necessities and inflation is running at 50%.

The drop in government revenue ultimately meant that the national debt couldn’t be serviced
Sri Lanka owes $51bn and doesn’t have the money to make interest payments. The country has to make $7bn in debt payments this year to avoid default, and is seeking $3bn in emergency loans from the International Monetary Fund. The IMF wants tax and interest rate hikes and cuts to public spending for that to happen. Sri Lanka is also negotiating debt relief measures with the G7 and China.

Sri Lanka is not alone. The number of developing countries with unsustainable debt levels has more than doubled this year to 19, according to Bloomberg data. That leaves $237bn due to foreign debt investors in uncertain territory.

Stat of the day

India is set to become the world's most populous country next year, overtaking China with its 1.4bn people, according to UN figures. By this November, the planet will be home to 8bn

Interesting links from around the web

How to cope the day after a terrible night’s sleep
Why IQ is not the same as intelligence
The best way to respond when someone insults you

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Tory leadership contenders tussle over tax

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