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missing tax cuts

Once again, all the elements of Tory economic policy are given their place at the Tories' top table, except for tax cuts which may or may not be invited in four or five years' time. I wonder what place at the table, if any, they will eventually secure.

When one listens to the passions with which the other guests are spoken of--deregulation and bashing lefties who bash profit--one imagines that our friend tax cuts won't be sitting very close to the leader, if they are even invited to join the other guests at the table at all.

Richard Weatherill

Were, I wonder, the CBI spared another repetition of David Cameron's "sharing the proceeds of growth" mantra? The problem that both candidates face is that, by 2009 (after several more years of Brown - in whatever capacity), economic growth is likely to be pretty sluggish. Given the fact that inflation in the public services outstrips 'general' inflation, there will, in all probability, be very little "share" of any "proceeds of growth" to direct towards tax cuts.
Davis is at least right (in my view) to say that tax cuts should in themselves be a catalyst for growth, but the problem is that you need to make the cuts before you get the growth. (It's the pain incurred in trying to convert a vicious circle into a virtuous one.)
The only option is likely to be some real cuts in public spending and, if they're honest, the candidates need to start spelling out where these cuts should best be made.
Surely no contributor to this site believes that every penny of taxpayers' money is currently well (or even justifiably) spent?

F R Leavis

Interesting speech, assuming they are direct quotes - especially the verbless section on Education. Can't quite recall who else uses verbless non-sentences.

loyal_tory

There is something of an imbalance in these speeches. The biggest threats to prosperity do not get the billing (and solutions) they deserve while trivial ones appear to be magnified out of all proportion.

Which is the biggest threat to prosperity Britain's tax burden--now of a size comparable to that which existed immediately prior to the tax and other reforms of the 1980s, or Christain Aid posters that denigrate free trade? Is Britain's climate really a bigger barrier to prosperity than her transport system? We may choose to be "equitable between private and public sectors" in pensions, but are we suggesting that the state pension has as much potential to get us out of the pensions crisis as the private sector?

Perhaps the imbalance arises by trying to appeal to the free market wing of the Conservative Party while at the same time trying to distance oneself from it.

a-tracy

PENSIONS: Johnson’s decision to allow existing public sector workers to retire at 60 ..… be equitable between the public and private sectors…

When Public Sector wages and benefits are being discussed and strike action threatened then I believe that for once and all the employees in the public sector should have a written statement detailing the cost of their 'taken for granted' perks and benefits, I've no problem continuing these perks as long as everyone understands the true cost and the total wage package:

e.g.
(1) the cost of providing full sick pay for every day's sick leave is an extra 4% on top of your gross wage,
(2) To retire at 60 your government employer (i.e. the taxpayer) will have to contribute the equivalent of 20% of your gross wage as well as your 3% contribution,
(3) The extra holidays over 28 days equates to £x per day (this is not just the daily pay rate but the cover payment of the replacement member of staff on top),
(4) The extra allowance of duvet days, time off for appointments, doctors, school visits of x number of hours per year equates to £x allowance.

Then the total salary package can be considered when negotiating by both parties.

Jack Stone

It totally amazes me that there are still people who haven`t learnt the lesson of the last two elections. If you go into an election promising tax cuts or public spending cuts you will lose.
It happened in 1997. It happened in 2005 and it will happen again in 2009/10 if the party does it again.
That is why the most foolish part of David Davis campaign is his promised tax cuts.With one policy he shows that he as learnt nothing from the mistakes of the past or understands the sort of policies we need to win.

Jack Stone

It totally amazes me that there are still people who haven`t learnt the lesson of the last two elections. If you go into an election promising tax cuts or public spending cuts you will lose.
It happened in 1997. It happened in 2005 and it will happen again in 2009/10 if the party does it again.
That is why the most foolish part of David Davis campaign is his promised tax cuts.With one policy he shows that he as learnt nothing from the mistakes of the past or understands the sort of policies we need to win.

loyal_tory

"It totally amazes me that there are still people who haven`t learnt the lesson of the last two elections. If you go into an election promising tax cuts or public spending cuts you will lose."

Hmmmm, like the tax cuts promised at the elections in 1979 and 1983 and 1987 and (gasp, in a recession) 1992? Or perhaps this refers to the tax increases delivered before 1997, the tax guarantee dropped before 2001, or the tiny tax cuts hastily scribbled on the back of an envelope and then just as quickly ignored in the Tory campaign in 2005 (of which only 3% of voters thought would actually happen if the Tories won, such was the level of commitment to them in the last parliament)?

wasp

The way to offer tax cuts is to set out rules on how you will manage the economy, as DD has tried to do.

His terrible mistake was to put numbers to it. Nobody believes the numbers and as such the promise is worthless.

loyal_tory

The Tories did not give clear commitments to precise rates in 1979 but they did commit to cut income tax rates in the following parliament. In the three elections which followed, there were commitments to rates, but not dates when these would be achieved. This seems to be a sensible mix of determination and caution. The Davis position lacks that caution, which is a mistake. But the Cameron position lacks the determination.

wasp

Good assesment loyal tory

Rob

Definately a good assessment, I agree totally. What is important is we dont go into the next election suddenly announcing tax cuts, we must consistantly make the case for lower taxes from now until the next election. If voters dont beilieve politicians will cut taxes, we must demonstrate why we believe tax cuts must be introduced, not only so people will trust we mean what we say, but also to convert them to our cause.

Passingthru

Good to see he mentioned transport. Labour has absolutely failed on every account in this area, and being something that affects nearly everyone, im surprised it has not been mentioned more.
However if elected, as much as i like the idea of a massive programme of road-building, im sure he, like every other leader for the past 25 years will capitulate to the short sighted idealism of enviroMENTALISTS and send our tax money to subsidise the profits of private bus and rail companies.

Jack Stone

Before tax cuts you have got to demostrate to the public you can improve public services as they just do not believe the party cares about public services. If you don`t do that the party will continue to lose. Thankfully DC seems to recognise that.
I don`t believe that its in the interest of the party or the country for that matter to start yet another mass road building programme.
We need a transport policy based on road pricing and investment in public transport.
We need to convince the public we are the party of the environment not the builder!

a-tracy

Get real Jack, we have one of the highest levels of road taxation in the form of fuel duty in the EU probably the world and it hasn't reduced congestion.

The only reason that politicians call this line of tax gathering road tolling is because they know damn well if they don't disguise it and were to put it directly onto fuel as they have done previously that they'd face civil unrest.

Do you live in city? In small towns in the north buses stop running at 7pm, the transport links take you over an hour to do 15 miles, all the jobs courtesy of regional planners and government funding are miles away in main cities leaving the commuters with little choice but to use their cars to work the flexible hours required by modern companies.

James Hellyer

Road pricing would be acceptable if road taxes and fuel duties were slashed. Instead I have a suspicion that it's intended as well as existing taxes...

a-tracy

What also should be remembered is that the logistical support structure for private business and retail outlets has changed significantly over the past 20 years with its dependency on rapid deployment of goods from warehouse to shelf (this is a version of just-in-time stock management).
You only have to go back to the chaos caused by the fuel protests in 2000 when within a 5 day period shelves in stores all over the UK emptied, had it continued for a further 2 - 3 days the catastrophy that followed would have been immense. Any change to the costs incurred in maintaining the supply chain will reflect in higher prices to the consumer.

Everybody makes the mistake of thinking that transport is still just a man in a van or a truck when the reality is the industry is at the forefront of technology in the way it plans and executes it's deliveries to very tight deadlines.

There is very little slack left in the system to absorb any further costs and there is very few alternatives to the current methods due to the investments made in the current infrastructure.

loyal_tory

"Before tax cuts you have got to demostrate to the public you can improve public services as they just do not believe the party cares about public services."

Sorry but this is only half true. The public doesn't believe the party cares about tax cuts either. Only 3% say they believed the Tories would cut tax if we won.

The tax-cuts-verus-public-services argument only works if you believe that tax cuts can only come at the expense of public services. Blair believes that, so does Brown, maybe some Tories do too. But whoever believes it, it isn't true. Tax rises and deteriorating public services have gone hand in hand under this government. So when the country gets fed up of paying ever increasing taxes to pay for ever worsening public services, the Tories had better have something worthwile to say.

During the Labour Government before Blair, people used to believe you couldn't have low inflation without having high unemployment. Mrs. Thatcher took it upon herself to persuade people that it wasn't true, and that inflation was a cause of unemployment. Now we have low inflation and low unemployment, proving she was right.

By the same token, us Conservatives need to show that it's not a choice between lower taxes and better public services, but that unless we give real purchasing power to the people who use public services, taxes will carry on going up and public services will continue to deteriorate. Reform is the key.

Boring accountant

Agree entirely with Loyal Tory's analysis (and condemn Jack Stone's, which might as well come out of Downing St). The danger of the DC approach of "sharing growth" is that it leaves slack to buy-off producers in the public sector and call it investment. DD's explicit growth rule carries political risks but has the great advantage that it provides an external discipline not unlike the Bk of Eng over monetary policy - there is no room for backsliding.

Pro-DC bloggers here have said that it is stupid to pre-announce your budget. Why? No major company leaves its budgetting to a few weeks before the start of the financial year, and they manage to operate 5 years in advance (that's why they're all on long term incentive schemes). Most companies have their equivalent of a growth rule, those that don't end up in something called insolvency. The public sector is "special" because, not having financial customers it doesn't have the day-to-day risk of going bust. But countries can go bust eventually - look at South America a few years back. Why not set a course now to squeeze that risk out of our system and reform the abuses?

Once upon a time people also said it was stupid to sell off council houses and to promise anti-trade union laws.

Rick

Now we have low inflation and low unemployment, proving she was right.

Hogwash. We have 2.6 million "unemployed" on "disability benefit" the highest level of disability in Europe. Only 50% men over 50 are in work and only 33% women over 50.

The Phillips Curve was a relationship based on 19th Century data.......and was used to get unemployment down to 1%. Inflation is low because the Index no longer includes housing (and house prices have only trebled since 1997) and the index has been rigged so many times by both parties since 1980.

It is just a case that there is enormous overcapacity globally with China etc and this is deflationary. Interest rates are low because Governments are creating enormous liquidity to keep them deliberately low - read up on Monetary Theory to see how it is done.

It allows price-bubbles in gas, petrol, housing to be created - but these are supposedly not 'inflationary'according to the govt.

that;s not economics

"Hogwash." and what follows after that is economically illiterate. The problem with disability benefit is at keeps people out of a labour market that is capable of providing them with a job. The problem with the labour market in the past is that it couldn't create enough jobs. Thatcher solved that one. There are inflation indices used by the IMF, World Bank, EU and others which show we don't have much inflation. House price inflation is caused by restrictions on the supply side (planning controls like the green belt and other micro-economic interventions, not increases in the money supply). China is growing so quickly because the world is working at under-capacity, and Chinese growth has not caused unemployment in Britain. The aforementioned disability benefit is a bigger cause. Interest rates are low because inflation is low. The ups and downs of individual prices reflects government controls in those sectors (and others) and market conditions. They are not the same as an increase in the overall price level. Indeed, the fact that they take place when inflation is low makes this obvious.

a-tracy

(not increases in the money supply)

I'm not sure I agree with this, wasn't it women working full time and their career earnings being taken into account in increasing multiples that created much of the house price inflation. When banks and building societies started treating womens' earnings as equal to mens house prices really took off, as well as the wage boom in the north created by wage differentials being kept pace with the NMW.

that's not economics

No. More money in the system to buy things (eg because more people are working) doesn't cause an increase in price over and above the general level of prices in the economy unless there are restrictions on supply which there are (in the form of planning and green belt controls) big time in housing (and which have been growing in size ever since the 1948 Town & Country Planning Act).

that's not economics

And higher wages in the North are caused by increased productivity--not the national minimum wage which insofar as it has an impact merely replaces workers with few skills with workers with higher skills.

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