The latter phase of the Major government was subjected to a particularly effective alliterative Labour mantra — “Twenty-two Tory Tax rises”. The idea was that in 1992 John Major had promised not to raise taxes — indeed had strongly attacked Labour for various tax-raising proposals — but had then raised taxes many times. Perhaps partly as a consequence of this, in opposition the Conservatives have regularly come under considerable pressure to make unequivocal promises about taxes. In both 2001 and 2005 we went into the General Elections promising tax cuts, with our only clear basis for paying for these being cuts in fraud and waste.
Now, as far as I can see, no-one doubts that government expenditure involves fraud and waste, but equally few people seriously believe that any one party will be materially more effective at cutting down on fraud and waste than any other party. Do you believe this, Dear Reader? Do you believe that Gordon Brown is not bothering to reduce fraud and waste, benignly looking the other way, but that a Conservative administration would effectively and efficiently eliminate it all? I don’t. I object to Gordon Brown’s government in all kinds of ways, but a belief that it is inefficient, except insofar as that is a natural concomitant of socialist methods of micromanagement and planning, is not amongst them.
Now we have a new formula. We will “share the proceeds of growth”, having “put stability first”, and will “not commit to any upfront unfunded tax cuts”. But we face pressure from our own side to commit to tax cuts, and journalists ask whether we really believe that a low-tax economy is more dynamic — and, if so, what is supposed to be the problem with committing to lower taxes?
In my view, all of these approaches suffer from the same confusion: they see the level of taxes as a startpoint, when in fact it is a residual — that is to say, the level of taxes is just the balancing item at the end of our political programme. The right approach, in my view, is to begin by asking what it is that we want the state to be involved in, and what is best left to the market and the voluntary sector. Then amongst those things in which the state is to be involved, we ask what is best dealt with by regulation or by the facilitation of (or compulsion to) private or voluntary provision, and what is best addressed by state provision or by state funding. This then tell us how much we need to spend. Then, knowing how much we need to spend, we know how much we need to raise in taxes, and we have our answer for the level of taxation — the level of taxation is the result, not the startpoint.
If, instead, we accept that the level of taxes is our startpoint, we reinforce a negative image that the voters have of us — as driven by financial considerations, rather than consideration of what will best help the poor and the disadvantaged, or what will best meet the needs of the many. Then when we do come to propose reforms of public services, people see them through this financial lens — they believe that our ambition is just to cut down how much tax rich people pay, because at our core we dislike helping the poor any more than we can get away with. This whole finance-driven concept of Conservative politics should be eschewed.
This means that a policy of “no tax cuts” is just as bad as a policy of
“tax cuts”. Each of them starts from the wrong, financially-oriented
place. We should not have any policy about the overall level of tax —
merely a policy about the overall level of spending. If asked about
how much we intend to tax, we should simply take the opportunity to
explain our spending plans — for overall taxation plans have no meaning
This does not, however, mean that we cannot have any tax policies other than those arising as a residual. It is perfectly proper for us to have policies about the forms in which taxes are raised. For example, there was a debate in the 1970s about income versus consumption taxes, and when Mrs Thatcher came to power there was a very considerable rebalancing of taxation — a large increase in VAT and a cut in income taxes. In our own time, I suggest there are three areas within taxation that Conservatives should engage with:
- The balance between green taxes and other taxes — I suggest that green taxes should rise as a proportion of the total tax take.
- The balance between income tax rates and the number of people that pay income tax — I suggest that personal allowances should be raised aggressively and the basic rate raised (say, back to 25p), so that fewer people pay any income tax at all.
- Inheritance tax — this is an iniquitous tax in principle, promoting a concept of equality of opportunity that Conservatives should disagree with fundamentally wherein we should all succeed or fail solely on our biological merit. It should be abolished.
So, when asked about what our policies on taxation are, we should say that our overall plans are to spend £XYZ, which we would fund with taxes that, compared to today, involve more green taxes, fewer people paying any tax at all, and no-one paying inheritance tax.