Why the government shouldn't raise taxes

Tackling our deficit with new levies would be economically and politically suicidal, says Max King.

Michael Portillo © Mathieu Polak/Sygma via Getty Images
Michael Portillo’s stance has been vindicated
(Image credit: Michael Portillo © Mathieu Polak/Sygma via Getty Images)

Not long after the 1992 election, I heard Michael Portillo speak at an investment conference in the City. Britain was then emerging from a recession, but the finances of John Major’s government were in massive deficit. Portillo’s message was clear. As Labour retreated from its capture by the Left in the early 1980s, the policy differences between Labour and the Conservatives, he predicted, would steadily narrow. But on one issue, taxation, there would continue to be “clear blue water” between the parties. If, however, the chancellor used tax increases to narrow the fiscal deficit, the Conservatives would be defeated at the next election and remain out of power for a long time.

Whereas Nigel Lawson had taken pride as chancellor in abolishing a tax in every budget, his successors adopted the opposite policy, perhaps egged on by Treasury officials. In 1993, Norman Lamont levied VAT at the rate of 8% on domestic fuel as well as freezing tax allowances and raising excise duties in real terms. Later that year his successor, Ken Clarke, introduced taxes on insurance and air travel and continued to raise inflation-adjusted duties.

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Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.