The foolishness of raising taxes: Britain’s budget plans are likely to make Britain less competitive, says ALEX BRUMMER

There are many caveats regarding the rapidly improving public finances. Not least is the fact that borrowing this year could still come in at, or above, £200billion.

Nevertheless, as the Chancellor puts final touches to next week’s Budget he is in a better position than expected with an undershoot so far of £43.5billion from the March forecast.

This is partly due to better government spending management and the rapid decline in some Covid-19 outlays (notably furlough) as the economy improved.  The most important thing about this year was how tax receipts rose with both income taxes rising and VAT revenues rising as the economy unlocked.

War chest: As Chancellor Rishi Sunak (pictured) puts the final touches to next week’s Autumn budget he is in a better position than expected

War chest: As Rishi Sunak (pictured), finishes next week’s Autumn budget, he is in a better place than expected

The underutilization on borrowing is a strong argument for trying to keep enterprise running at full throttle rather than braking down through new Covid rules. 

Free market think-tank the Institute of Economic Affairs notes the ‘whopping’ improvement in the public finances in the first six months of the year already has seen the stock of national debt to total output fall from 99.7 per cent in June to 95.5 per cent now.

This raises the question of whether it is wise for Rishi Sunak, Chancellor, to keep with Treasury orthodoxy, and bake massive tax increases, including the increased corporation tax and frozen personal allowances in the cake.

One doesn’t have to be a swivelled-eyed believer in supply side economics to recognise that the NIC increase is a tax on jobs and the higher the UK’s corporation taxes (on current plans they rise from 19 per cent to 25 per cent in 2023) will make Britain less competitive than many of its counterparts.

Britain is not Singapore in north-western Europe. It is at risk of becoming a more taxed country than the social democracy of Scandinavia.

This is not the way Brexit was intended to work. The Treasury argues that the Chancellor cannot bank the war chest he has built up due to undershoots in deficit and debt because of the threat from higher interest rates.

If the Bank of England were to lift bank rate to one percentage from the current 0.1 per cent, the cost over the forecast period to 2025-26 would be £25billion.

Even if tax rises approved are not reversed, this is just a fraction the potential deficit and debt improvements. Don’t let Sunak’s spin machines fool you.

Health kick

Alan Jope has shot the fox among analysts calling for changes at Unilever’s top because of its lackluster performance.

Unilever managed, in spite of global price pressures on vital ingredients like palm oil, to maintain profit margins through efficiency gains in the supply chain during the third quarter of 2021.

There are still a few inflation-affected quarters before logistics and ingredients costs peak. So there are still questions about how much can be absorbed.

Analysts are concerned that Unilever is more exposed than its peers to emerging markets, with Indonesia being one of the most difficult.

In its key markets of the US, China and a lesser extent, India – where Covid has lingered longer – growth has been delivered. 

Despite unsolicited advice, there is no current intention to acquire or dispose of quoted Hindustan Unilever.

Unilever continues its search for newer, more exciting products. The purchase of Paula’s Choice digitally native skin-care brand Paula’s Choice by Unilever, better known as beauty online, fits this description.

Unilever may be a potential buyer of GSK’s consumer-health care brands, or joint venture partner. 

This would be a large transaction, even for a giant company like Unilever. Stranger things can happen.

Fee fever

Investors who backed Jes Stealey during his New York activist Ed Bramson’s siege were right.

As other UK banks struggle to find fresh streams of income, Barclays’ decision to twist rather than stick on investment banking has paid off with the lender booking profits of £2billion for the third quarter, boosted by 59 per cent year-on-year jump in fee income from M&A and the like.

Post-financial crisis, casino banking was widely frowned upon. It’s very good when it’s good.