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Why would one wish to raise tax rates in a recessioni?

But, startlingly, Cameron accepts that this figure could rise even higher under his government before he gets around to reducing it.

It is perfectly consistent with Cameron's approach in other areas like the state funding plans.

Don't seek to address and solve the issue that caused the drop in income, just charge the over burdened taxpayer a bit more.

So, the more the economy becomes uncompetitive and shrinks, the more Cameron will tax, the more business will leave, the more the economy will shrink, the more Cameron will tax etc.

Some heretics like myself might suggest that if the economy is shrinking because it is becoming globally more uncompetitive, you might, hold your breath, mad idea approaching, seek to make it more competitive by cutting taxes?

Sorry. I know it is no longer conservative to seek to grow the economy by becoming more competitive.

One would not wish to raise tax during a recession however their could be factors that would mean you had to increase tax or adjust the PSNCR. It is a given that with increased unemployment during a recessionary cycle the social security budget requirement would increase with increased benefit payments etc, so a government in a recession would have to make a hard choice of budget cuts in other areas or tax or borrowing hikes. Not a pretty picture really.


Agree with you but...

Frau Merkel seems to think its a good idea; the 1981 budget was a nett increase budget under Howe (and worked).

Think its to do with the cause of recession - Howe's worked because it brought confidence through rectifying our finances. Clarke's budgets might not have been in recession but had same balance the books philosophy and delivered (unfortunately to Brown) a stable economy.

I don't think we are going to be in a recession in 2008-2010 but do think the tax burden will be an issue, as will Gordon's "spending cuts" (he has all but Education on a pretty tight leash).

Tend to agree with TPA that we should have a target at end of first parliament of reducing from 43%+ - say to to 40% or less but we need to present this in a politically intelligent fashion.

Also Osborne seems to indicate business tax reductions (to restore competitiveness) take priority over personal tax cuts - so DC might be trying to get expectations in voters set to allow this.

All these attacks on Cameron's economic policy are massively over the top. When he talks of putting stability before tax cuts or of possibly not being able to cut taxes due to a recession he is merely stating that he won't pay for tax cuts through debt (cuts in spending in response to a recession are impossible to do well... think fire sale). This is eminent good sense and a fiscally conservative position. It is the one that Hoover adopted (to bitter criticism from Keynes).


By contrast, all the "taxcutters" in the party might be comforted by a Bush-style tax cut paid for with debt. Unfortunately, that is only a tax cut for the superficial.


"It is the one that Hoover adopted (to bitter criticism from Keynes)."

In the circumstances of the early thirties, Keynes was correct.

Tax cuts can not be done overnight without either increased borrowing or overnight termination of contracts. There is also genuine debate within the US as to whether Bush’s aggressive tax-cuts have actually done anything for their economy, or whether they have resulted in a twin deficit. They’re certainly perceived as a break for the rich. Anyone sensible has to remain unconvinced.

All Conservatives want lower tax, but that will take time to deliver.

Is it worth arguing with Cameron's tax policy? It's so utterly stupid, and he's made it so clear that he's sticking with it, that it leaves us with a simple choice:

1) Accept it and move on (because the rest of his programme is not so awful)

2) Accept it and move off (because there's no point working for the election of a 'Conservative' who is undermining Conservatism.)

My own choice at the moment is (1). So long as I don't have to put up with any more rubbish.

The public don't fear that the Tories will cut taxes, they fear that the Tories will cut spending on spublic services (by cutting taxes).

Up until now, talk of tax cuts has been used to imply cuts in public services, but Cameron could clear this up in a second and pledge to maintain Labour's public service spend for one parliament.

This will remove the fear of public service cuts, then once in power Cameron could do the conservative thing and improve efficiency etc to both reduce taxes and run public services cheaper.

Once the public are reassured that the Tories will match public service expenditure (just for one term) then it uncouples the tax-cut public-spending argument used by Labour to undermine the conservative approach to run services more efficiently and thus cheaper.

Actually reading the interview, it is rather comforting for the right: John Redwood says he's confident we'll be going into the nezt election as the low tax party, patient/pupil passport policies may be resurrected, his admiration for Thatcher, etc. Since the target audience is the Spectator, presumably that is the intention.

A couple of observations:

1. He is right to say that if we inherit a shrinking economy, which is possible, then there is a situation where taxation as a % of GDP will indeed go up, even with tighter spending plans, as revenue shrinks faster than spending for example. This statement however makes a headline which is not really a headline. Interestingly, Blair refuses to discus hypothetical situations, presumably to avoid just such a situation as this.

2. WRT renewal of Toryism not oppositionism, I am confused by this statement as it stands.

I can understand Camerons reluctance to behave in opposition as we have done for the last 9-years. We only really got passionate about nasty and divisive issues and were conspicuous in ignoring the softer issues people care about. That is ineffective opposition, but there is an effective way.

We need to (as he says) present an alternative that is less hard nosed, and more compassionate, but we must also tie this into an effective strategy of opposition if we are to stand a chance of gaining power. We must undermine the Government, but find a more subtle way of doing it:

- We need to present alternative policies and differing approaches to governing, i.e. liberal conservative vs authoritarian Labour and, in many cases, (confusingly for those not fully up on political theory) even the LibDems. And use our policy as a position as a base to contrast us to Labour.

- Responding to attacks pro-actively, and ensuring our newrooms work efficiently, our spokesmen are well briefed and come across well.

- When Labour introduce policy we don't like, then instead of sitting quietly, we use our policies as a centre for debarte of the alternatives to voters.

- Unlike often in the past, we consentrate more on quality of life issues instead of areas that, yes need adressed, but turn voters off and make us look like we are obsessed with things that are unpleasant. But this can be done in opposition too.

Whilst one obviously can't have two "number one" priorities, being an effective Opposition and promoting a positive view of the Conservative Party certainly aren't mutually exclusive. Sounds like a suitable case for the "And theory"!

Tamzin Lightwater deserves praise for her services to the Tory Party

Lower taxes can be delivered immediately.

There's huge amount of waste in the current government that can be eliminated. Reducing the higher rate of tax and corporate taxes, will increase UK tax revenues - just as it did in the 80s, did in the US, Ireland, Eastern Europe, Australia etc. Expect the usual denial of this fact - backed up by no facts or statistics

I know this is a very small point, Lambo but it does niggle me a bit. Tamzin makes fun of a person 'supposedly' in DC's office that has a name very similar to a friend of mine in another shadow minister's office, and I don't think its very fair.

Can we have a separate blog called KneeJerkHome.com please? Why will people not read an article and engage their brains - analytical and political sides - before mouthing off?
Cameron is stating an economic truism about the tax burden. Fact.
If you go off and set up a rival party to the Conservatives, I, personally, don't give a monkeys about your views on David Cameron.

Victoria Street says ", If you go off and set up a rival party to the Conservatives, I, personally, don't give a monkeys about your views on David Cameron."

You're spitting in the face of the 5 million voters who deserted the party and whom Michael Howard made a start in winning back. With an attitude like that one is tempted to say "All right then; go down in ignominy as the neo-Liberal Party."

Cameron shows no intelligence over Green issues, he stifles debate on the EU [our contribution to which for little return would provide for all the tax cuts one could hope for.

Victoria - "Cameron is stating an economic truism about the tax burden. Fact." What is the truism?

And do you know what truism actually means? Maybe you should find out before you attack others for failing to engage their brains.

Christina, DC isn't parrying with the 5 million voters who stopped voting Conservative - he's paying out on the handful of nutjobs that sought to set up other party structures when it was easy to kick the Conservative Party.

You're assuming that all of those people that for whatever reason changed or stopped their vote for us feel as passionately as you obviously do.

I don't dislike the people that have changed their vote - I just think they're wrong, and I'm keen to see the Party seek to persuade them back, which DC seems to be doing well. It's the people seeking to create the alternative party structures that should properly be the target of scorn, and for whom I have utterly NO sympathy.

Surely in the event of a Conservative Government there could be a Mini Budget pushed through that made public spending cuts as a means of avoiding tax rises, indeed surely the best way to boost the economy is to cut public spending and cut taxes.

In addition things such as School buildings and Hospital Buildings, NHS Estates for example could be floated on the Stock Exchange, National Savings and Investment Agency, Crown Estates, Duchy of Lancaster, Duchy of Cornwall, Covent Garden Market Authority, there are still a lot of Local Authority owned airports, the Motorway Network, state stake in Mersey Harbour & Docks Co, Parcelforce, there must be a number of other things that could be sold.

As Ive commented before, my economics knowledge isnt great as it was a part of a Business A Level, but tax rises in a recession??? Tax rises take more money out of the economy, unless its matched by increases in government spending to the same level. But that could just escalate and then it simply gets messy. Cutting taxes boosts consumer spending, which puts money in the economy, boosting business. Unless Im wrong, in which case please point out why and Ill gladly shut up.

The tax burden by the way is at a level seen by economists to be dangerous. The Government has its own rule for it which says 40%. Burning Our Money says its at 42% at the moment (havent seen the figures but I can believe it) which means serious problems. Brown knows he cant increase taxes much further.

Does anyone know the economic evidence in favour of raising taxes in a recession? If there isnt any, Im assuming Cameron came down the to Ramsgate and smoked some Thanet-grown cannabis, then had a bright idea!

"(cuts in spending in response to a recession are impossible to do well... think fire sale)."

Matthew has a good point. While cutting public expenditure is good for the economy it is electoral suicide during a recession.

"In the circumstances of the early thirties, Keynes was correct"

No he wasn't :p. The recession was an inevitable and necessary correction to a boom created by credit inflation. Malinvestments needed to be liquidated and government expenditure needed to be cut so that the economy could grow easily once the bust was over.

The only way you will kill off the business cycle is to establish a 100% reserve requirement and shut down the central bank. But I accept Austrian School economics is unorthodox and so wouldn't advocate it in a Tory manifesto.


We have no idea what position will be in 3/4 years but Brown has managed to increase borrowing in the growth part of the cycle which causes great concern in looking at what position would be in case of recession. If recession is due to financial markets taking view UK is insolvent rather than just decline in personal expenditure then honest balance the books tax increases can work so can't be ruled out as it can result in improved confidence.

My fear is that Brown will have delivered an economy increasingly dependent on public expenditure growth and so consumer spending falls because of personal debt, private investment goes flat and we face a different version of 1979 again. Thatcher (if you look at figures) was unable to deliver real tax reductions until her second term because of mess Labour left last time.

Cameron is perhaps being too honest about what could happen.

Raising taxes in a recesion isn't all bad. In order to get out of the recession, it often helps to restore confidence in the public finances, to reassure both foreign investors and domestic consumers. Increased confidence should allow domestic consumers especially to go out and spend money, boosting the economy and helping to drive it out of recession. Once the economy has resumed growing, it's highly likely that the government can then drop the new tax rises, except now there is no risk of endangering the public finances.

Remember, tax cuts don't solve everything. I know this may be hard for some of you to accept, but keeping the level of public debt down and maintaining confidence in the public finances are equally important. Dramatically raising the level of public debt (as advocated by David Davis) which would result from recessional tax cuts would have long-term costs for the economy, and is nothing more than economic short-termism.

Victoria Street: Can we have a separate blog called KneeJerkHome.com please?

Good idea to park all the "Cameron is an idiot/traitor" comments in one place.

And another one called PoodleKennel.com for the bile posted as "right-wing ideas are poison"/"criticism of Cameron will cost us the election".

AndTheorist... wouldn't that be bliss?

When there is a recession, certain types of government spending (e.g. unemployment benefits) rise.

Health and education spending etc. tends to stay the same.

Moreover the private sector is temporarily contracting.

Hence the share of the state in the economy rises. Nothing to do with tax RATES which stay the same.

This is all Cameron is saying. He is just saying that if this is the case he will not cut state spending automatically just to keep it at an artificial 0.x% lower for the financial year. (Which would in any case probably prolong the recession.) Quite sensible. He then goes on to say that he is in favour of tax cuts. Which is good. I'm not always a fan of Cam but he seems to be perfectly reasonable here.

And Theorist - we might be arguing from different directions but we are all unified in our aim to kick this discredited Labour government out of office.

Look for the positives!

Nice one, 'AndTheorist'. Those of us who are occasionally a teeny-weeny bit over-critical of Cameron might be less so if it weren't for the continuous gasping of Dave's Stepford Wives...

buxtehude - I must be a Stepford Wife I guess. I bought a pair of converse velcros last week.

Laffer curve nonostante, surely if we get in and there's a downturn in growth, then in certain circumstances government spending as a percentage of GDP would increase? I think that's all Dave () said in the article - I have a feeling that the Spectator were looking for a headline hook that would get us all reading - it worked!!

Is anyone going to the Meet The Dave event on Monday evening? I'll be the guy in the trainers, gasping. Be nice to meet anyone who writes here.

Graeme Archer: "Surely if we get in and there's a downturn in growth, then in certain circumstances government spending as a percentage of GDP would increase? I think that's all Dave () said in the article"

Maybe, but to my ears he was saying a little more. It isn't just the words - though even here, I would argue that if the economy is shrinking, that's a very bad state of affairs which needs to be addressed by tax cuts to promote growth - it's the fact that he chooses to talk about this at all. He SHOULD be talking about the proper role of tax cuts, which is to promote growth, NOT as a gift or prize for when things are going well! He shows that he fundamentally doesn't understand this subject.

Of course if you have shrinkage then the proportion of taxes instantly goes up. But do look carefully at his words. He says, "we could inherit an economy that is shrinking rather than growing, so if the economy is shrinking, you might find that the share will be going up."

It's like a doctor saying, "if you are bleeding to death and you arrive at my hospital, you may find you continue to bleed."

Well, in one sense, obviously. But the point is, for how long? Only for a few seconds, I hope. A doctor should be talking about how he would deal with it. Is he going to apply sutures? Get a blood transfusion? What exactly?

Why is the leader of the Conservative party, if he's concerned about a shrinking economy, not talking about how to make that economy grow again?

THAT is my point. He's talking about the wrong things. But he's talking about them deliberately. He's doing it to signal a new attitude to taxes, which is that tax cuts are a gift from on high to pat us on the back for being good boys, not that they are an instrument of growth. He thinks this new attitude is necessary to be more like Blair/Brown/Ming.

Maybe he's right. I think he's dead wrong. If the economy is shrinking, the country won't be voting for more of the same.

The change he should be enacting is communicating economic policy in a new way. I agree we shouldn't be using the same old verbiage about 'tax cuts'.

But then we'd need an economic policy, wouldn't we? And some understanding of the real changes in the world, and some willingness to think a little deeper. And that's too much to ask for, I suppose.

Tax cuts didn`t win the party the last three elections they lost us them.
The public rightly or wrongly view Tory tax cuts with public spending cuts and untill you convince the public that you are not going to cut spending on public services all this talk about about what we are going to do when elected is just hot air. Because frankly the party hasn`t an hope in hell`s chance of being elected if we start promising tax cuts again.

Thank you for you 9.05 post, Bux. Spot on!

Indeed, spot on. When is the Tory Party going to start showing how it will increase the trend rate of growth and productivity in this country.....which are the guarantor of everything we value including high-quality public services? At present, we have had vacuous cliches....but that's where reading PPE and History at Oxford get you.

And there is more to tax cuts than just promoting economic growth. Allowing people to retain more of their hard-earned income shows that the government trusts the people to make their own decisions and run their own lives. It gives a powerful message about independence and empowerment. It goes along with what 'Built to Last' says about the state not running things. Unfortunately by saying that business tax cuts come first (after all the extra 'green' business taxes have been imposed) what little policy the Cameron leadership has come up with seems to run directly contrary to this philosophy.

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