Clarke prepares the way for Tory tax rises

Ken Clarke began an operation yesterday that will go through many phases between now and the General Election and that operation is about preparing Conservative voters and the nation at large for Tory tax rises.

It's the main subject of Ben Brogan's article in The Daily Telegraph: "Taxes will rise after the next election," he writes, "whoever wins. Does that surprise you? Is that a shocker or a statement of the bleeding obvious? Gordon Brown knows it. So does David Cameron. Yet neither will say so. It is their inconvenient truth."

I stand by my view that there should be no tax rises until possibilities for savings in the massively-expanded Labour state have been exhausted.  So long as the Conservatives are pledging to continue growth in the bloated NHS budget I cannot accept that those possibilities have been exhausted.  Without exhausting possibilities for savings, the tax rises will be steeper and the consequences for economic recovery and a 'brain drain' enormous.  McDonald's became the latest major international company to abandon Britain this week as its headquarters for its European operations.  A higher tax burden will only increase this flight.

If the Tories do opt for tax rises to close Labour's historic budget deficit where are they likely to come from?

• Higher taxes on business are unlikely.  “Business taxation was a no no if you’re trying to strengthen a recovery,” said Clarke yesterday.
• A brake on all existing Tory tax pledges as reported by the News of the World is more than likely despite denials from CCHQ.
• Green taxation (kicked into the long grass as an idea during the recession) may be raised without commensurate cuts.
• VAT up to 20% (that's the tax hike highlighted by Brogan).
• A big increase in co-payments.  Co-payments were a big idea of David Cameron's Tory leadership bid but little has been heard about them since.  Then he talked about students helping to pay for their university education and motorists helping to pay for roads.  Will charges for certain medical services be one way of a Tory government maintaining NHS spending without plundering other departmental budgets?  I'm only speculating.

What the Tories are very likely to say is that any tax rises will be temporary.  They will be enacted for three or four years with sunset clauses inside them.  They will be levied to reassure markets and ratings agencies that the Conservatives are serious about deficit reduction but the Tory Chancellor will do everything he can to communicate that the Conservative Party hates raising taxes and will return to a lower tax path as soon as possible.

Tim Montgomerie