High taxes battering economy – but Jeremy Hunt STILL resists cuts to prevent the economy ‘flatlining’

• Experts said ONS figures showed economy has been suffocated by interest rates
• They also said we have an ‘onerous tax burden’, the highest since the WW2
• Hunt has continued to resist calls to cut taxes in upcoming Autumn Statement

Pressure is mounting on the Chancellor and the Bank of England to slash taxes and interest rates to prevent the economy ‘flatlining’.

Output stagnated between July and September, thanks to a toxic combination of high borrowing costs and tariffs, and the cost of living crisis squeezing household budgets.

Experts said Office for National Statistics (ONS) figures showed the economy has been suffocated by interest rates – which have been hiked to a 15-year high – and an ‘onerous tax burden’, the highest since the Second World War.

But Jeremy Hunt has continued to resist calls to cut taxes in the upcoming Autumn Statement – while the Bank’s governor Andrew Bailey has insisted it is ‘too early’ to talk about slashing rates.

Responding to the figures, Mr Hunt said: ‘High inflation is the single greatest barrier to economic growth. The best way to sustainably grow our economy right now is to stick to our plan and knock inflation on its head.’

Jeremy Hunt has continued to resist calls to cut taxes in the upcoming Autumn Statement 

The Bank’s governor Andrew Bailey has insisted it is ‘too early’ to talk about slashing rates

Meanwhile, the accountancy industry body, ICAEW, said the Bank of England ‘may have overdone’ rate hikes.

Although Britain is faring better than the Eurozone, where output fell in the third quarter, there are concerns the UK has become a ‘stagnation nation’.

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UK gross domestic product (GDP) showed no growth in the third quarter of 2023, compared to a 0.2 per cent uptick in the previous three months, the ONS figures showed.

The services sector declined between July and September, while manufacturing and construction grew slightly.

Tory grandee John Redwood said: ‘The economy is now flatlining and we need some growth.’ He said the figures added weight to the argument for the Chancellor to announce ‘selective tax cuts’ to ‘boost output and activity’ for businesses.

John O’Connell, chief executive of the TaxPayers’ Alliance, said: ‘The effects of a record tax burden are clear to see. The Chancellor should use the Autumn Statement to change course and transform the tax system for the better.’

The Bank held interest rates at 5.25 per cent at its past two meetings following 14 consecutive hikes earlier this year to tackle inflation. The latest data showed inflation was at 6.7 per cent in September, down from 10.7 per cent at the end of 2022.

Output stagnated between July and September, thanks to a toxic combination of high borrowing costs and tariffs, and the cost of living crisis squeezing household budgets. Pictured: The Bank of England 

Figures out next week are expected to show it has dropped to around 4.8 per cent, meeting the Prime Minister’s promise to halve it by the end of the year two months early.

But questions will be asked about his second pledge to ‘grow the economy’.

Suren Thiru, economic director at the ICAEW, said: ‘These downbeat GDP figures suggest the Bank of England may have overdone the interest rate rises, and with that, the case for rate setters to pivot towards loosening policy is likely to strengthen.’

James Smith, of the Resolution Foundation think-tank, said Britain had become a ‘stagnation nation that has struggled to secure sustained economic growth since the financial crisis’.

Former Brexit minister David Jones said: ‘The economy needs to be stimulated to growth. Corporation tax should be reduced to encourage investment and business expansion. Income tax should be cut to put more money in people’s pockets.’

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