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A moral of the TPA/IOD report is that tax cuts mean spending cuts. The Government needs a plan for them. Send for James Purnell (and others).

By Paul Goodman
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Screen shot 2012-05-22 at 09.06.45The Guardian chooses this morning to report the joint Taxpayers Alliance/Institute of Directors Tax Commission report - the headline recommendation of which is a "single proportionate income tax rate" of 30% - by focusing on how the proposed tax cuts would be financed: namely, by "cutting the ratio of spending and taxation to 33% of national income, forcing Osborne to maintain the current level of spending cuts until 2020".

The TPA and the IOD are only the latest in a series of commentators to worry about the Government's lack of rigour in scaling back public spending - though the claim is contested.  Oh no it isn't, Fraser Nelson argued in the Daily Telegraph last Friday, reporting that the Government is "borrowing more over five years than Labour did over 13".  Oh yes it is, if you take into account debt interests and the automatic stabilisers, wrote Nick Pearce of the IPPR earlier that week: to pretend that the UK government hasn’t cut spending, he said, is simply wrong.

But whichever way you see it, tax cuts on the scale needed in the short-term to re-fire the engines of growth and, in the medium and long, to buttress our competitive position as the East rises will be impossible to deliver without tough, hard spending choices being made.  The Government's spending review looms in any event.  It will be painful and bloody.

Describing tax cuts makes pleasant reading.  The TPA/IOD report, presided over by the excellent Allister Heath, is none the worse for that.  But it is time for some unpleasant reading - a description of spending cuts.  Because without them, tax cuts won't and can't happen (even allowing for their revenue-raising potential, a point with which senior TPA members agree).

Fortunately, a prospectus for such cuts - without which the Plan E described by Tim on this site yesterday cannot gather momentum - has been set out on this site by -

Ideas suggested included privatising more prisons, introducing a cap on social housing, more regional pay bargaining, scrapping the regional growth fund, reducing the pupil premium, ending free bus passes for pensioners, curtailing high speed rail, curbing statutory maternity pay, abandoning Trident and restraining the rise in overseas aid and health spending.

Were George Osborne to recommend many of these measures riots would result.

Which is why the Government needs some political cover - some voices that spell out the choices  if Britan is to pay its way.  I have suggested an affordable spending commission, on which would sit big hitters from all parties and none.  Nigel Lawson, Norman Lamont, Alan Milburn, Frank Field, Mr Heath himself (Allister, not Ted).  And so on.

Another person who recommends himself is James Purnell, the former Labour Work and Pensions Secretary.  Read his Times ($) piece yesterday if you're allowed behind the paywall.  "Someone," he wrote, "needs to give Britain a new idea of itself that it can afford".

The Government has an opportunity to score an open goal by asking Mr Purnell and others to sit on such a commission.  I appreciate that it's been more inclined recently to wallop the ball over the bar or past the post, not to mention into its own net, but hope springs eternal.


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