Dr Jonathan M Scott, an enterprise educator and an entrepreneurship policy researcher at Queen’s University Belfast and author of the Wilted Rose blog, looks at the significance of Labour's pre-by-election tax bribe.
Perhaps one of the most remarkable outcomes of the contest at Crewe & Nantwich is the resultant positioning of Alistair Darling as a “tax-cutter”. The Chancellor has achieved tax cuts, something that has been unthinkable in recent years, in an attempt to win a crucial by-election.
The tax debacle was self-imposed, as one of Brown’s last careless actions as Chancellor in 2007 when he too tried to position himself as a “tax-cutter” by reducing the 22p income tax band to 20p to produce sensational headlines. Maybe the Brown bounce that followed his coronation as Supreme Leader of the Labour Party, and our Prime Minister, was partially caused by people’s elation that Brown had cut tax when the Tories didn’t dare do so due to the myth of public opinion? (This myth is the left-liberal notion that the electorate was prepared to pay higher taxes because they believed, falsely, that the alternative was reductions in public services). The Brown bounce lasted an even shorter period of time than the misguided belief that the tax cut was without a hidden stealth tax. The myth of public opinion has also evaporated: people are now hurting financially, and need some immediate remedy.
It was the abolition of the 10p tax band (and not just the Credit Crunch, Northern Wreck, and the general feeling that Brownian Economic Policy was a lie of Emperor’s-New-Clothes proportions) that turned Brown into the Sub-Prime Minister. And Alistair Darling was altered, for one fleeting moment, into the Tax-cutting Chancellor; but this fairy-tale transformation was about as permanent as Cinderella’s.
To try to win a by-election by introducing a policy which is (almost) a U-turn on a previous policy error is almost laughable, were it not so serious. Having offered some sort of ham-fisted remedy earlier, the £2.7 BN Policy [sic] was less credible than Brown’s earlier “British Jobs for British Workers” BNP Policy. At least the £2.7 billion “package” didn’t breach one of the EU’ s four pillars, that of “freedom of movement of labour” [though I wish Samson were around to demolish them], though it breaches Brown’s Golden Rule on borrowing. But Brownian rules are made to be broken, when an electoral crisis arises. Mind you, Darling’s £2.7 billion is so badly targeted that it still leaves 1.1 million people worse off, while gifting £120 a year to people who weren’t adversely affected by the abolition of the 10p tax rate.
Robbing Peter (£12K a year, no kids) to pay Paul (£24K a year, no kids) was never good politics. Nor was the U-turn, when there was no altruism behind the policy. When you have been robbed, if the robber returns your money later you are unlikely to say, “Thank you” – you will merely pick up the telephone and dial 999. (Not that the police will be able to deal with the matter, due to the form-filling required.) State-sponsored robbery (like state-sponsored foetal infanticide) is perfectly legal, of course, even though it is most certainly not moral.
So where do we go from here? The Conservatives have forced Labour into the position first of accepting that increasing the threshold on Inheritance Tax was a political imperative, and now into (almost) reversing a tax increase imposed only last year. It means that no politician dare ever again raise taxes (certainly not income taxes, and most certainly not on the low paid). Politically, the Conservatives are winning the argument on tax at last (and the Forsyth Report was a superb think-piece as a basis for policy development) – although I have argued before that it was the Taxpayers’ Alliance (TPA) which won the argument first. Had it not been for the lobbying by the non-party TPA, the prospects for the electorate would be much direr in the current economic climes.
David Cameron has hit a public nerve in his timely speech on taxation in Birmingham on 19th May with his statement that, “after a decade of reckless spending under Labour, Britain needs good housekeeping from the Conservatives ... we have reached the limits of acceptable taxation and borrowing.” This speech may be one of the most important and forward-looking since Margaret Thatcher’s Bruges Speech on Europe in the late 1980s. The need for tax cuts are predicated on the “rising cost of living” and the need for “relief.” Having asked people on the doorstep in Crewe why they were not voting Labour again, the impact of the rising cost of petrol, housing, food, and other necessities upon their quality of life were the predominant reasons.
Quality of life is not something to be ignored by politicians. In a famous quotation, Dickens’ Micawber emphasised the misery of having less money coming in that what you are spending. The Government must listen not just to the electorate but also to the wisdom of Dickens. People have committed to their mortgages and not only to these but are faced with significant inflation that the dishonest and disingenuous Consumer Price Index (CPI) measure fails to include. It is simply not credible that inflation is only 3%! Brown’s Bank of England independence policy looks increasingly flaky when its Governor, Merv ‘the Swerve’ King, signalled that interest rates must not be reduced for at least two years.
The notion that Darling and Brown are “tax cutters” is patently absurd. They have neither the ideological commitment to tax cutting, nor do they seem to have any altruistic intent to help people who are suffering the unintended consequences of Brownian economic policy. Labour are non-believers in tax cuts, except when it suits them politically and even then they are not really tax cuts, just reverses of prior miscalculations. Policy specialists still debate whether tax cuts stimulate economic growth, as Arnold Laffer argued (i.e. the ‘Laffer Curve’, not the ‘Merv Swerve’), because the tax take rises with incentives for enterprise. However, what these policy experts cannot deny is that tax cuts alleviate the burden on “hard-working families” (as well as childless individuals and couples) that has been caused by previous policy and the external economic environment over which the public has no control. It is no longer merely an economic growth argument but one of quality of life, a social necessity.
Labour still hasn’t learned the lessons from their notorious higher-rate-tax-increasing Shadow Budget that sent the Conservative vote through the roof in 1992 (proving that tax is Labour’s Achilles heel). One lesson from that enormous policy error was that it wasn’t just people on the higher tax band that turned out to vote Conservative on that day – but also people who aspired to increase their income (and thus move into the higher rate tax band). The mantra “hard-working families” resonates with people, such as the author of this article, who has not had the privilege to become a parent, but who would very much like to at some point and yet wonders exactly how under the current taxation system they’ll be able to make ends meet if they start a family?
Alistair Darling is no “tax cutter”, Gordon Brown is a Sub-Prime Minister, and it is time for a Government which is actually in touch with the electorate and can deliver altruistic policies that will alleviate people’s financial burden and enhance their quality of life. David Cameron’s speech has proven that he is in touch, and that his party is that Government in waiting.
