Edward Leigh MP: The downtrodden taxpayer should receive the proceeds of growth

Edward Leigh is Conservative MP for Gainsborough and Chairman of the Public Accounts Committee.  With John Hayes he leads the Cornerstone Group of Tory MPs.

Now that the dust has settled over Gordon Brown’s Budget, the Conservative Party should recognise that it has the greatest opportunity in a generation to champion the case for lower taxes.

Of course, I am well aware that we have fought the last two elections on a promise to cut taxes.  The scale of our proposals was modest – only £4 billion or about one per cent of total taxation under Michael Howard in 2005.

But that did not stop Labour running its well-tried and tested big lie that the heartless Tories were planning to shut half the schools and hospitals in the country so that they could fatten the wallets of their rich friends.

Brown’s Budget has changed all that. By reinventing himself as a tax-cutter, Labour will no longer be able to advance its moronic but plausible argument that you cannot cut taxes without putting doctors and nurses on the dole.

What is sauce for the goose is sauce for the gander, Gordon. If you can unveil a 2p cut in the basic rate of income tax without putting schools and hospitals at risk, so the Conservatives can come forward with their own ideas to ease the pain of a tax burden, which is now as high as it was in the 1970s when Denis Healey was making the pips squeak.

Fortunately, David Cameron has not turned his back on tax cuts. He has spoken of sharing the proceeds of growth between higher public spending and lower taxes. It is a perfectly sensible formulation. The only issue is who gets the lion’s share.

I believe it should be the downtrodden taxpayer and that efficiency gains, also accepted by Brown as a legitimate source of revenue, should be used to safeguard service delivery in the front line. My fear is that the Conservative Party, badly scarred by its failure to make headway last time, will make the mistake of fighting the last war and commit itself to a relatively feeble programme of tax cuts, all but indistinguishable from those of a Brown-led Labour government.

I believe we need to be big and bold in our tax-cutting ambitions and that we should exploit the mistakes made by Brown in scrapping the 10p starting rate of income tax and thereby clobbering the poorest people in society. He has increased the amount of income tax paid by millions of people earning less than £15,000 a year and left them with only one recourse – to join his army of state supplicants and fight their way through the undergrowth of his virtually impenetrable system of tax credits – not claimed by 40 per cent of those eligible.

This is the moral case for low taxation. Under our cock-eyed, unfair system, the poorest people pay the highest tax. According to the Office for National Statistics, the poorest fifth of households pay 36.4 per cent of their gross income in direct and indirect taxes, compared with 35.6 per cent for the richest fifth and 35.3 per cent for households on average earnings.

Brown may be gloomily wondering why both he and the Labour Party are increasingly unpopular with voters. Is it because he has never met the Arctic Monkeys? Is it because Tony Blair’s evasions over Iraq and the award of peerages have turned the Labour brand toxic? Is it because our public services are hopelessly mismanaged? Could be. But it could also be because the combined effects of tax rises and higher prices are leaving people worse off. Real disposable incomes are no higher now than they were four years ago, according to a study by tax lawyer Charles Elphicke published by the Centre for Policy Studies a couple of weeks ago.

But there is also an economic case for cutting taxes. Low tax economies are successful economies, generating growth, jobs and revenues for the Exchequer.

To take a couple of examples. Ireland has transformed its economy over the last 20 years, achieving average growth of 7 per cent from 1992-2005 – roughly three times that of the UK. Aggressive cuts in personal and business taxes have driven this so-called economic miracle. Corporation tax has been reduced to 12.5 per cent and personal taxes have been slashed from a basic rate of 35 per cent 20 years ago to 20 per cent today.

Australia has followed a similar course, slashing tax rates, achieving GDP growth of an average 3.6 per cent over the last decade, and eliminating the chronic budget deficit of the pre-1996 era.

Socialist pre-conceptions about tax-cutting are wrong. Lower taxes equal faster growth and more money for vital public services such as health, education and crime-fighting. Our international competitors are cutting taxes; we are moving in the wrong direction by raising taxes. As the OECD has noted, the UK’s tax burden has increased by 3.2 per cent since 1997. There is also a political case for cutting taxes. Opinion polls are consistently showing public support for reform of the public services and reductions in taxation. For instance, an ICM survey for The Taxpayers’ Alliance found that nearly 60 per cent of people believe that if Britain reformed public services and cut waste, taxes could be lowered without having to cut spending on vital services. Over 70 per cent of people believe that taxes have risen and that we are not getting value for money from public spending.

Gordon Brown has levelled the tax and spending playing field. We should now outflank him with a bold tax-cutting proposal designed to help the low paid.

We should aim to take around 14 million low paid people out of income tax altogether. This could be done by tripling the personal tax allowance to £15,000 in today’s prices – which would also mean raising the top rate threshold to £47,000. Such a change should be phased in over the lifetime of a future Conservative government and could be paid for without cutting public spending or increasing borrowing.

Over a four-year period the cost of such a proposal in lost revenue would be about £44 billion. We could balance the books by holding future overall spending increases to inflation rather than the 2 per cent increase in real terms envisaged by Labour. On top of that, we could use efficiency gains from our bloated and wasteful public sector to produce real increases in priority spending areas such as health, education and law and order.

Much like 1979, we are at a tipping point in the tax and spending scales. To help the low paid and keep our economy on track, we should share the proceeds of growth this way.

Comments

[MikeA]

Many good comments here.
If you look around the UK political scene at the moment a few things are obviously apparent:
- huge disapointment in NuLabour failing to deliver meaningful change in society and the anger about the Iraq war in general
- a general feeling that we are over-taxed and the government is hugely wasteful of our tax money
- a high desire to have strong public services (primarily schools n' hospitals)

Nowhere has this become a groundswell demanding tax cuts. The public still cannot reconcile investment (er, spending) on public services with tax cuts.
By holding this debate, we are discussing taxation from Labour's political baseline, from their territory. They have won the PR argument here period, suggesting tax cuts is to be asked which hospital you want to close. They did it successfully before and they will do it again. Why re-arm them with pretty effective ammunition? Better to go to the election promising to review our taxation level which is too high, as Osborne is basically proposing now.
Please, please ignore the siren voices demanding massive tax cuts, they are a short-cut to electoral suicide. I agree that they should not be, but in the 3 years or so to the next election we are not going to change the terms of trade in this debate. We all agree with Edward's self-evident points, but frankly I want to win the next election and not hand Brown a great big stick with which to beat us. Talk about tax cuts about 2-3 years into a Cameron government when we have seen how bad the books are, and we have re-defined our public liabilities to include the PFI liabilities scandalously excluded, Enron-style.

[congaconga]

I'm usually quite enthusiastic about Edward Leigh, however THIS IDEA COULD TURN OUT TO BE A REAL POLITICAL DISASTER FOR US.
I remember being told in France that The French Conservatives have a huge problem with the fact that many poor people there do not pay income tax. This means that there is much less pressure to relieve the huge tax burden, which falls on the upper-working class and the middle classes.
It seemed to be one of the reformers' big headaches there.

We musn't shoot ourselves in the foot like this. If we are going to bring down taxes we must do it accross the board.

[David Sergeant]

Sorry, Leigh seems to be living on some other planet. Of course reducing the tax paid by the lower paid should be a priority for tax cutting, and Osbourne has said so. But coming out with this naive rubbish merely demonstrates to voters how silly Tory MPs are, something they noticed in the 90s when Labour were supporting their wishes for increased public spending.

After the next election there will need to be increased spending on defence, increased spending on debt relief, some spending regarding pensions and reduced tax for industry. There will be a mess to sort out and effeciency savings never happen.

[comstock]

We musn't shoot ourselves in the foot like this. If we are going to bring down taxes we must do it accross the board.

Just before the 1992 GE the Labour PPC for Burton came to my school to speak. She said if you give a millionaire an extra £1000 tax cut he will put it in a bank account somewhere, but if you give ten low paid people £100 each it will get spent I was too young to vote by a matter of weeks, but that is something that has stayed with me since- that redistributive taxation doesn't just make sense from a moral point of view, but from an economic one also . I'm not convince this is what is being proposed here-surely you would have to lower the top rate threshold, not raise it if you want the poor to benefit from this, either that or raise the top rate.

And BTW none of this detracts from my utter, *utter* contempt for this man's views on gay and womens rights.

[Alastair McCulloch]

The thinking is along the right lines. The debate needs to happen even if the end result is very different or there is no policy change at all.
I have never understood why someone who earns the minimum wage of just over £9k a year has to pay tax at all! If the minimum wage is just that, then why should that not be the starting point for tax? Instead we have this rediculously complicated, bureaucratic and expensive system of taking money with one hand and handing it back with the other.
It should not be beyond the wit of the Conservative Party to come up with a simpler, fairer and more effective system of taxation

[Conservative Homer]

The chap in the picture, edward leigh, always looks like he's about to sneeze.

Anyway, getting rid of tax credits would be a nice start to restricting spending.

At least theres no mention of Green Taxes to 'reduce the tax burden on the poor' when such taxes are essentially highly regressive.

[David Cooper]

"If you give a millionaire an extra £1000 tax cut he will put it in a bank account somewhere, but if you give ten low paid people £100 each it will get spent."

OK, so the millionaire banks it and receives interest. The bank lends it to an entrepreneur who uses it to set up a small business and creates ten jobs out of thin air in his first year's trading. Meanwhile the bank's cut on this deal is reflected in a boost to its share price and a higher dividend, both of which enhance pension funds throughout the land.

Alternatively, it's blown in ten equal proportions on booze and fags in the space of a weekend.

You're the taxpayer - what's your preferred destination for the £1,000 tax you've just paid?

[Richard]

"if you give a millionaire an extra £1000 tax cut he will put it in a bank account somewhere, but if you give ten low paid people £100 each it will get spent"

The money saved in that bank account will be invested somewhere. Increased savings = increased economic growth.

[Biodun]

You made the point I was going to when I read that, David Cooper.

I think the fact the comment was made by a Labour PPC shows their usual weak grasp of simple economics and financial markets.

They do not understand the concept of growth, only re-distribution. A £1000 in a bank to them is dead money, to us it's part of someone's mortgage.

The problem is that too much of the electorate falls for the false logic.

[Mark Fulford]

Just before the 1992 GE the Labour PPC for Burton came to my school to speak.

Did the school also invite the other PPCs to speak?

[Editor]

Hi there Biodun. Where have you been for so long?

[Biodun]

I'm here everyday, Tim. Everyday :-)

I just don't feel a compulsive need to leave comments anymore. They're more amusing to read than to write!

[comstock]

Did the school also invite the other PPCs to speak?

Flippin heck we are going back 15 years here mate-I've slept a few times since then!!!

As I recall they were but Ivan Lawerence was unable to attend at the last minute due to a 3 line whip in the HOC. Dunno if the LibDems (might even have been the alliance back then?) sent anyone.

If anyone knows who the Burton PPC was in 1992, I'd be interested because her words have stayed with me to this day (Wikipedia doesn't go back that far)

Meanwhile back in 2007...................

[Soupy Twist]

Q: Why was their a big shift of the tax burden on to low income groups since 1979?

A: Because direct taxes went down and indirect taxes went up.

[comstock]

That is very true, Soupy twist. And the direct tax cuts benefited the richest most.

[Biodun]

According to the Guardian, the Burton PPC in 1992 was a Ms Patricia Muddyman

[Ash Faulkner]

Do you know what makes me really, really, really sad?

The fact this will never be done.

[Scotty]

"but bad language and personal attacks contravene this site's comments policy. Please attack Edward Leigh's views but not him personally."
I would hope that policy is applied to everyone not just the "chosen few"!
How many people voted Edward Leigh leader of Cornerstone?
David Cameron got a hell of a lot more votes than this gentlemen, although judging by the way Leigh behaves you could not accuse of being a team player or a signed up member of the Conservative parliamentary party!
Is he now employing an independent policy committee and will he continue to advocate what he feels like in opposition to the leadership?

[Martin Bristow]

Edward Leigh's proposals are a welcome step in the right direction.This targeted tax cutting needs to be part of a wider stratergy to change behaviour and encourage personal responsibility.It is not helpful to genearlise about how people from divergent socio economic groups may or may not spend any additional income.Only by supporting those at the lower to middle income end of the scale can we promote a change from a society based rigidly on welfarism and hostile to social mobility.

The process would be slow but that is not excuse for not taking the step. As for Edward Leigh's views on Gay Rights these appear to me to be drawn from a specific ethical standpoint he has underpinned by his faith. That is his business .You should never silence debate over any issue and name calling is just plain silly.

[comstock]

As for Edward Leigh's views on Gay Rights these appear to me to be drawn from a specific ethical standpoint he has underpinned by his faith. That is his business

Oh, it's not just gay rights, Martin, he is against abortion (OK a lot of people are)but also against contraception!!!!!

Anyway you are wrong, IMHO. He has chosen to become an MP-voted for by the public, paid for by the public, making laws for the public....... his (un)ethical standpoint therefore affects his work, and ultimately all of us. I repeat, would CH give a platform to a racist, even if he was talking about another issue???

[Martin Bristow]

Comstock,you need to consider two points:

1 The electorate of Mr Leigh's constituency seem happy to elect him.They are not frigtened off by any of his views why do you suppose that is and what right do you claim to challenge their democratic choice?

2 Conservative Philosophy has never seen an MP as a delegate to do the public's bidding.A Memeber of Parliament must excersise his or her judgement in the service of the public-just because you don't like a particular view or judgement does not mean that it should not be aired or even that others don't find those views appealing hence why does Mr Leigh have a seat in the commons.

You need to challenge him ina constructive reasoned way dealing with arguements,not name calling.

[Andrew Ian Dodge]

This is a good start. How about a flat tax ala the one proposed by the ASI? The UK should be looking to Estonia to see where its economic policies should be heading not into more mealy mouthed centrism. I wonder if the Tory Party is noticing that even Sweden is paring back its statist policies and adopting economic liberalism?

[David Belchamber]

Brown, in his recent contrick of a budget, has just put tax up to 31% (including NI) on earnings of about £5,200 p.a. and upwards.
If you take into account the real rate of inflation (not Brown's) and above inflation council tax rises, I defy anyone to even subsist in this country on under £7000 or £8000 a year without paying any tax at all, let alone 31%!
I have long argued that it flies in the face of common sense to tax people at a level that makes it impossible to subsist and therefore require them to go cap in hand to a benevolent government for a handout.
How demeaning and how unnecessary, especially when Brown can't even manage the tax credit system efficiently.
Whatever you say about Edward Leigh, the principle contained within his message must be heeded by the tories as something to aspire to.
I accept though that something should be done first to try and repair some of the damage done to pension schemes by Brown and we will also have to to take account of his disastrous PFI projects that will create a huge liability for generations to come.

[Adam]

Andrew Ian Dodge @ 11:06,

how can you say that this proposal is a good start and then advocate embracing a flat tax? Leigh's proposal is the exact opposite of a flat tax - it designed to cut taxes in a way so that they become more progressive.

[James Maskell]

Is Edward Leigh a particularly religious man? If so, it would easily explain his views on abortion and contraception. It doesnt make him a homophobe or racist, does it? It just means his religious views are prominent in his thinking.

[comstock]

Martin said:-

2 Conservative Philosophy has never seen an MP as a delegate to do the public's bidding.

So now we get the truth. Thank you.

[Martin Bristow]

Comstock,you should not select bits from whatI said.I also said what an MP'S role is from a conservative perspective hailingback to the tradition of Burke.An MP is not in place to do any groups bidding.He or she excersises judgement on behalf of those they represent.

That is very different from going to the House to simply do what the majority wish.The problem with this approach is that a self interested minortiy more disposed to political activity would gain undue influence.Much in the way trade unions were run pre Thatacher.This should notbe part of Conservative thinking,in my view.

[MarkW]

Interesting that all the people who welcomed this idea have not considered that Edwards idea is in fact already official UKIP policy. If you want small Government and low taxes, the Conservatives arent offering it, UKIP are

[Eric BP]

UKIP are certainly not going to form the next Government - All votes for them will just make it more difficult for Labour to be replaced - so everything that UKIP sympathisers dislike most is even more likely to happen - and a "hung" Parliament would inevitably make matters so much worse, because the LibDems are now so left wing and pro Europe. Only Conservatives can be a credible Government.