Osborne may prioritise business tax cuts and green tax rises

In a well-received speech yesterday to the British Chambers of Commerce, George Osborne emphasised his campaign to save the Home Computing Initiative and the importance of a reduction in business taxation:

"As and when we move in the direction of lower taxes, I acknowledge that there is a strong argument for cutting business taxes first."

Mr Osborne also promised tax simplification and other supply-side reforms to tackle the "furring of the arteries".  The preference for business tax cuts is an important statement of intent.  Gordon Brown's taxes are a major cause of Britain's declining economic competitiveness and Mr Osborne may be calculating that lower business taxes can be more easily presented as economically responsible than cuts in personal taxation.  The danger is that such a preference could be portrayed by Labour as proof that the Tories remain in the pockets of (big) business.

My guess is that George Osborne will offer tax relief at the next General Election - the lion's share probably designed to spur economic growth.  If the budget is tight by the time of the next election - which David Gauke MP warns may be sooner than we think - these targeted cuts could be made affordable by offsetting increases in green taxation.  I certainly expect Team Cameron to prefer a Tory candidate for London Mayor who will support congestion charging.  Such support will very possibly feed into a wider support for increased taxation of environmentally-harmful activities.  The Gummer-Goldsmith policy group may, for example, recommend taxation of air travel (something already advocated by Tim Yeo).  Such policies would be controversial but Mr Cameron is under pressure to move beyond "quick, easy and free" environmental posturing and demonstrate his seriousness about tackling pollution.

Such a combination of general cuts in business taxation and offseting increases in green taxation could be used by Team Cameron to simultaneously present the Tories as friendly to business and the environment. 

Comments

[london tory]

Supporting business tax cuts and "green" tax rises over personal tax cuts is hardly evidence that the party better understands the electorate.

Those of us who, in common with most other voters, are not heirs to vast personal fortunes can perhaps appreciate the need to increase the rewards for work and savings a little better than those for whom tax and spending policy is apparently an exercise in PR. Business tax cuts are not more "economically responsible" but simply more fashionable among those in the party who currently seem to be deciding tax policy.

[Donna Kelly]

I am a small businesswoman, and it is really important to me to have a low-tax, low-regulation environment. I want to grow my business, and I cannot do that in a situation where I am strangled by high tax and constrictive rules and red tape. I welcome Mr Osborne's statements on this matter, and I support the overall direction of the current Conservative team in this area. Lower - and flatter - taxes are good things.

However, on a related matter, I am extremely concerned about the reports I am hearing regarding Cameron's discussions on taxpayer-based State funding for political parties. I truly, seriously, hope this pernicious nonsense is stopped dead in its tracks. State funding will lead to more voter alienation and further corruption in the halls of power. Just look at France! I understand the current mechanisms, such as Short money, and I support them. But to directly fund political parties in the UK would be antagonistic - in fact antithetical - to all that our system has stood for.

Yes to Osborne's thoughts (although they need fleshing out), but no, no, no to any State funding of politics in my country.

[Chad]

George Osborne emphasised his campaign to save the Home Computing Initiative

Mr Osborne also promised tax simplification

So is he emphasising tax complication and tax simplification in the same breath?

The Flat-Tax may be out of the window but what is wrong with a simple 2-rate flat tax system (Ok I know it is flatter rather than flat)? It would have almost all the upsides of the flat tax whilst clearly showing the rich pay a higher proportion, thus negating Labour attack on the system.

It is good to hear tax reduction messages though but it still sounds like tinkering with the Labour approach rather creating a distinctive conservative approach.

[Chad]

but no, no, no to any State funding of politics in my country.

100% agreed Donna. Politicians have the arrogance to state that we, the public, "cannot have it both ways" in terms of caps and state funding, completely ignoring the fact that it is not up to us to prop up failing political parties.

[John Coles]

I agree with London Tory - it's the ordinary taxpayer that needs relief. Business owners would be sufficiently galvanised by the very existence of a Conservative government to plan for a more accommodating tax environment and wait a little. Lower taxes must be a real and immediate prospect for the ordinary voter if Mr. Cameron is to have a chance of getting in.
This shows yet again that the Conservative party is out of touch with what the country would welcome. Locked in the citadel of the M25, seduced by trendy metrothink, in thrall to many of Blair's basic political beliefs, today's Conservative party is on the road to more years in the wilderness.

[Ted]

The last YouGov poll after the budget asked:
"The Chancellor said in his speech that the country faced a choice between tax cuts and continuing rises in investment and public services. Which would you personally prefer...?
Tax cuts 37%
Rise in investment in public services 47%
Don’t know 15%"

So even with NHS failures in the headlines "investment" is still preferred by most voters. Even more telling is that 69% thought any "investment" should be in the NHS! Keep throwing cash at it seems to be the prevailing thought.

So as far as polls go far from being 'seduced by metrothink' the current downplaying of tax relief & pro NHS talk seems to be in line with the ordinary voter.

I'd much prefer a low tax, low dependency economy but rather than concentrate on the outcome - tax relief - lets concentrate on the enablers; driving waste out of government, killing off high cost programmes like ID cards, re-organisation & centralisation of the police, gesture politics like rewards for youths who behave well etc. Do something about the huge costs of enforcers - councils employing people left right and centre to check householders, citizens & businesses are obeying onerous legislation.

So yes we do need to make businesses more competitive but that's not only tax - it's putting additional costs on small businesses through social costs like maternity/paternity legislation, enforced pension contributions.

Osborne needs to look at the whole picture - so if we support quality of life issues we match those additional costs by reducing others significantly.

[James Maskell]

Osborne has his priorities wrong here. Personal taxes have to drop prior to business taxes. Otherwise consumer spendIng will remain low and it wont matter how low business taxes are, the income just wont be coming in at the rate they need it.

[Jaz]

He has it absolutely right, business tax cuts must come before the personal tax cuts. Frankly we need to stimulate growth for small-business' as priority over income tax cuts. I had a feeling that this was Camerons direction when he became leader, and it seems that he will deliver on the "sharing the proceeds of growth agenda".

[I told you so]

I'm sure I've heard this somewhere before...

http://conservativehome.blogs.com/platform/2006/02/nick_longworth_.html

[Daniel Vince-Archer]

"Osborne may prioritise business tax cuts and green tax rises."

So Chris Huhne is dictating our economic policy now? ;-)

Seriously though, this approach is one I have no qualms about supporting, although I'm not really sure where it fits in with David Cameron's pledge to 'stand up to big business'...

[Nick Longworth]

DVA. N.B. George was talking to the British Chambers of Commerce, which represent small and medium sized busineses, so the code seems to be "two employees good, four hundred thousand bad".

[Henry Whitmarsh]

Since when did we have to appeal to Independent readers to win elections? Climate change is a nonsense. The real issue is energy security, which nobody is talking about. Eventually the oil will run out or become too expensive, so we'll have to find alternative energy sources. Besides, we only produce 2% if the world's CO2.

Of course they're talking about "tax relief for business" to "spur economic growth." Saying you're going to wholesale lower and flatten taxation might scare the horses.

[Adrian Owens]

A promising speech that recognises the critical need to support our wealth creators.

[Daniel Vince-Archer]

It's a shame George Osborne's sensible remarks have been completely overshadowed by one throwaway comment by David Cameron - quite surprising given how PR-conscious the new leadership is.

[TomTom]

Perhaps we could invite some of our largest corporates to pay Mainstream Corporation Tax - a great many do not.

The smaller businesses could be given tax relief if the major groups like News International paid some - what is the average tax rate for a British Plc - 20% ? Middle Management pays 40%.

These low tax rates make investment very expensive -