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Matthew Elliott and James Frayne on David Cameron's first 100 days: Tax

Taxpayers_alliance_2 Over the last week ConservativeHome has hosted diverse reflections on David Cameron's first 100 days as Tory leader.  There have been Platform essays on the environment, the Tories and the working class, social justice and David Cameron's opinion polls impact.  Yesterday David Cameron wrote for ConservativeHome.  Today - in the final piece - Matthew Elliott and James Frayne of The Taxpayers' Alliance focus on the issue of tax.

Cameron’s first 100 days strongly suggest that the Conservative Party will not meaningfully campaign for lower taxes in this Parliament.  Given that the Party has made low-tax one of its key campaign messages for years, that’s a big step.

Cameron’s rebranding of the Party – above all in the briefing that accompanied the Built to Last document – has deliberately excluded low-tax from the new Tory brand.  The way the document was briefed to the media and the news stories that followed made it clear that the Party was “junking Thatcherism” and the things that go with it – including low-tax.

The TPA is disappointed the Conservatives are abandoning the issue of tax for two reasons:

  • Firstly, we think the Party is wrong to have concluded that “you can’t sell low tax”.
  • Secondly, we think that Britain is set to face a set of economic challenges that will make low-taxes vital to our future economic strategy.

Dealing with the first point, the reason the Conservatives have struggled to make the case for lower taxes is because they have spent the last ten or so years making a very narrow, economic case for lower taxes at a time when the economy has been perceived as doing well and when the Party’s ratings on economic competence had bombed after the ERM debacle.  In short, it’s been the wrong message.  Messages that “Brown is ruining the economy with his tax rises” were obviously going to fail.  (This does not mean the economic message cannot work.  If anything it looks set to become very powerful again but it clearly was ineffective throughout most of the ‘90s). 

Instead of making such a narrow case in the ‘90s the Party should have looked at the way George W. Bush made the case for lower taxes (in similar political and economic circumstances) ahead of the 2000 election.  Bush didn’t make a narrow economic case.  He made a personal and moral case for lower taxes in the framework of “compassionate conservatism”.  He said that he wanted to help make ordinary American families’ lives better by cutting their tax bill to give them more money to spend on their child’s education, on their homes etc.  He articulated the case in terms of how he cared about ordinary people.  Cameron could certainly have fitted lower taxes into his own “modern compassionate conservative” framework. 

On the second point, we believe that ruling tax cuts out will make it more difficult to deal with the unprecedented economic challenges of the 21st Century – or to put pressure on this Government to deal with these challenges. 

While Britain is used to dealing with competition from low-cost countries in Asia in low-tech manufacturing, increasingly Britain is having to deal with competition from these same countries but right across the board.  Emerging economic powerhouses like India and China are starting to challenge Britain in areas like high-tech manufacturing, financial services and so on.  These economies combine lower-costs with higher-skills – quite a combination.  We need an economic strategy that keeps costs down by keeping taxes low and regulation light.  If we do not succeed in this then Britain will face a period of sustained economic decline.  “Stability before tax cuts” is all very well but at a time when our tax burden is set to overtake the tax burden of Germany - widely viewed as the Sick Man of Europe – then all economic stability is going to mean is gradual but steady economic decline.

David Cameron is clearly a very effective communicator and some have even encouraged comparisons with JFK.  Cameron certainly has some of JFK’s star quality – the question is whether Cameron is prepared to follow Kennedy’s position on tax:

“An economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits… In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.”

Matthew Elliott is the Chief Executive of The Taxpayers' Alliance and James Frayne is its Campaign Director.


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