George Osborne MP: Bring on the tax revolution

"George Osborne is the Tory whom Labour will come to fear most."

- Headline in today's Telegraph above Matthew d'Ancona piece

In yesterday's London Evening Standard (not available online) George Osborne made the case for a flat tax.  He 'made the case' without saying that he was convinced.  He thinks that it deserves further study and is about to set up a commission to investigate.  Shortly after he became Shadow Chancellor he had told the Today programme that he thought it unlikely that a flat tax could work in a "mature" economy like Britain.  Over the summer he has warmed to the idea.

"Excessive government regulation, a lack of skills, a poor transport infrastructure" plus high and complex taxation are the four main reasons, he thinks, for the fact that:

• UK productivity growth has slowed;
• Inward foreign investment has almost halved; and
• Britain has fallen from fourth to eleventh in the global competitiveness league.

We have been raising taxes as our competitors have been cutting them.

Flat systems of taxation are particularly attractive to Mr Osborne.  They do away with the mounting compliance and collection costs associated with UK tax law - which has doubled under Gordon Brown and which needs 24,000 extra tax inspectors to enforce.  Flat taxation can also be progressive, he insists, if "accompanied by a generous personal allowance".

The best part of Mr Osborne's argument, however, is the way he is attempting to re-frame the terms of the debate. At the last election we basically accepted Labour's terms and said that every tax cut was at the expense of a spending increase... but that we could still afford lots more spending.   We should never again squeeze ourselves into the tax cut versus higher spending frame.  The real argument - the winning argument - is to say the choice is between a high-tax-low-growth economy and a low-tax-high-growth-full-employment economy.

I'm not yet convinced that a flat tax would be politically acceptable in a mature economy but lower and simpler forms of taxation are the only way the British economy will compete in today's world.  George Osborne deserves Matthew d'Ancona's praise (and to stay in post under the new leader).

Comments

[James Hellyer]

That's a nice collection of straw men you've got there, Oberon. Did they take much time to build?

Look, it's simple enough. People don't trust us on the economy because we made them endure Lawson's dodgy economics (borrowing to fund pre-election tax cuts - inflationary, much?) and then honest John promised a recovery and delivered Black Wednesday.

[a-tracy]

But WHY do huge sections of the electorate, like Mary, still believe Tony and Gordon?

Because they don't want to accept reality. They'd prefer to listen to trendy Nana and generous Grandpa (except in the real world Grandpa isn't spending his own money) than believe Ma and Pa who are telling them to go to bed at 9pm so they get sufficient rest, take sufficient exercise, eat their greens and do their homework.

People prefer to listen to good news than bad news, the Tories need to deliver positive messages of change required and clear reasons why. Eventually though when they have to have their teeth filled, when they're obese and have gallstones, when they're on the dole because they were too tired to study hard at school they'll want Ma and Pa to put it right and make it better. Problem is will they be able to if it goes too far.

One of my favourite analogies is that the Titantic Captain could have taken a slower, more Southerly route at any time up to the point that he hit the iceburg thus saving the boat and more importantly the people onboard, however, he chose to listen to the owner and the builder convincing him that it was the strongest and safest passenger liner built (they didn't even bother putting enough lifeboats on they were that confident). Unfortunately for all on board what happened to the majority of them and the vessel is consigned to history. Let's hope that unlike the passengers of the Titanic we don't all wait too long to change course.

Problem no 2. The Tories are too busy arguing over who will Captain the ship than concentrating on avoiding the dangers ahead and explaining those dangers if the course isn't changed.

[Oberon Houston]

"Tories need to deliver positive messages of change "

Thats it, you have hit the nail on the head. It isn't our policy thats bad, it's the way we interact with the electorate thats simply put, awful. It is just form, but it is important. Who would cover their car in mud and then try to sell it?

[James Hellyer]

"But WHY do huge sections of the electorate, like Mary, still believe Tony and Gordon?"

Because people don't feel hard up.

Home owners feel rich. On paper their property might be worth a fortune. That this isn't realisable money (unless they sell their houses and don't buy another one) doesn't seem to worry people.

For the rest of us, debt is cheap and will continue to be so until the economy pinches and more and more people can't keep up.

[a-tracy]

Who would cover their car in mud and then try to sell it?

Yes and who would advertise the car with every single fault listed including it's parking blindspot!

[Oberon Houston]

There is truth in that, how many Governments have been kicked out of office when things are going ....okay...? Not many.

Its this term that really counts, and we need to do everything possible to try and heighten our electability - the consequences of not doing so are just too awful to contemplate.

[malcolm]

Don't get your analogy about the car at all a-tracy.
Oberon, we were kicked out in '97 when the economy was doing well.Since then we have been unable to come to an election with a policy which most people believe.This year we tried to keep the election campaign so far away from the economy I started to wonder if we believed in it ourselves.

[a-tracy]

Malcolm, basically as we approach the impending leadership election each faction is setting out how they would lead the Tory party (advertising their wares) into the next election and the Country out of its current problems.

However, in so doing they also highlight the current inadequacies of their fellow leadership opponents and their policies which in turn presents a very negative image of the Tory party to electorate. All the voters see is the arguing and finger pointing and a group of people who don't seem to agree about how they're going to solve the problems from the NHS to Pensions.

Until the leadership contest is behind the party, you haven't a hope of selling the ideas and policies to the electorate (nor are the Tory politicians holding the government to account at the moment) and they are going to be left with the idea that contenders don't support each other, that there are great divisions between the different factions.

No matter what you're trying to sell the secret is to present it in a way that makes it attractive to the maximum number of people. I was, very simply I know, just saying that as well as not presenting a filthy dirty car, you wouldn't stand there pointing out all of the faults that lie beneath the mud that you can't see, after all mud can be washed off, but a rusty hole in the bodywork needs a major repair. After all if the Tory's can't agree on what to do, how on earth do you expect to attract none committed persons to believe you can fix it.

There's one thing you've got to admire the Catholics for, when it came to choosing a new Pope, they trundled off behind closed doors, you don't know what arguments took place, who sided with whom, what deals were done - all we know when the white smoke came out was that it was sorted and they came out united. Displaying your dirty washing in public isn't good.

[simon clewer]

Flat tax is for idiots ... a complex modern economy needs a complex modern tax system.