John Redwood's policy group "likely" to recommend tax relief

John Redwood, Chairman of David Cameron's Economic Competitiveness Policy Group, once said that "the Conservative Party is a party of tax cuts or it is nothing".  In a Q&A for ConservativeHome (published today), Mr Redwood reaffirms that understanding of the Conservative Party's purpose and agrees that it is likely that his "policy group will recommend reductions to the biggest tax burden in British history".

That tax-cutting attitude is certainly needed.  A new paper for the Centre for Policy Studies by Charles Elphicke - some findings of which are summarised in the graphic - notes that the nation's tax burden is having serious consequences for economic growth.  Mr Elphicke talks of a double whammy where people have (1) less money today because of Gordon Brown's 80 tax rises and (2) less money tomorrow thanks to the ways in which taxation depresses economic performance.

Editor's note: "George Osborne's talk of putting stability before tax cuts does nothing to increase public understanding of the dynamic role that tax relief can play in creating a strong economy.  Labour win the tax debate when Conservatives fail to present tax relief as an instrument for job and wealth creation.  Small government conservatives will never prosper so long as the public believe that every tax cut requires service cuts.  We can only start winning the tax debate when it becomes framed as a choice between a growing, low tax economy versus a sickly, high tax economy."

Comments

[Chad]

100% agreed, and I love to see the "tax relief" frame being well used at last.

It is completely incongruous to slam Brown's high tax environment then champion this very environment as a source of stability.

Taxes are too high. They are damaging our long-term international competitiveness. They need to come down.

Conservatives should be honest and seek to win the argument clearly that it is high taxes not tax relief that is the biggest threat to investment in public services.

Talking about 'simplification' alone is cowardly and just dodging the issue.

Well done John Redwood; A conservative with intellect and backbone.

[David Belchamber]

The tax system must be simplified and based more on common sense (e.g. almost double personal thresholds, so the very low paid do not both pay tax and receive tax credits).
Of course, taxes must come down under a tory government but we mustn't frighten the horses. If Blair/Brown see us pledging tax cuts, they will repeat ad nauseam that we are going to slash public services to pay for them.
Also, Brown has created so many non-jobs in his time that to lay off significant numbers of these will be costly and unemployment will rise again.
All this will need properly costed policies and excellent presentation.

[Editor]

David: It is not clear how yesterday's family speech - suggesting new tax allowances for families wikth children and for childcare - is consistent with the emphasis on simplification of the tax system. Particularly if there also going to be special tax allowances and news tax on green issues.

[Chad]

Tim,
Is is just me, or does simplification mean less new types of taxes and allowances, not more?

Swapping one set of complicated tax breaks etc for a different set is not simplification.

If simplification really is an aim, then surely the pledge should be less types of tax even if they can't bring themselves to pledge less tax itself.

Simplification is easily proveable, as it will mean a shorter self-assessment form.

[Serf]

What tax policy should be:

KISS: Keep it simple, stupid.

[James Maskell]

I dont buy this. Cameron and Osborne have already put a veritable brick wall against this. If Redwood tries to propose tax cuts he'll be ignored. Still, good luck to him. He doesnt say how big the tax reductions proposed might be...I doubt he'll be as radical as some of us would like him to be.

[Chad]

I agree Serf.

It is too easy to vaguely discuss 'simplification' but all we have seen is new tax breaks etc, which is simply shifting rewards from one party's chosen few to the other.

If George Osborne really wants simplification, then let's see him pledge less types of tax. A smart accountant will be able to easily verify the pledge.

[James Hellyer]

Tax simplification should mean that the number of allowances and breaks are actually reduced. Simplification was part of the rationale behind the removal of the original married couple's tax allowance.

It's hard to reconcile this talk of the need for simplificiation with Cameron's pledge to support marriage through the tax system.

It's a very mixed message.

[Chad]

It's interesting and perhaps telling that of two threads today, one about taxation and another about picking a logo, one has all the traffic, displaying 4 to 5 times as many posts as the other.

Image or issues? I guess the choice has been made.

[Chris Berryman]

I agree with David Belchamber.

Now I am no taxation expert, however surely it may be worth looking at the possibility of raising the personal allowance to £10k. It seems barking for those who earn such a low income to be taxed with one hand only to receive tax credits back by the other - all this does is create administration to deal with and hence wastes taxpayers' money.

Addittionally, given the numerous cock ups with the tax credits system this may give the low earner confidence in what they have avaliable to live on and more ownership of their finances.

I'ld be interested to hear what everyone else thinks to this idea?

Of course then there is the whole issue of a "flat tax" for all - is that another can of worms for another day?

expertopinions.org.uk

[David Belchamber]

One hesitates to suggest yet another enormous government IT project but will John Redwood's group look at the idea of introducing negative income tax to sweep away a raft of benefits?
It might not be feasible - or even desirable - but, with everything up for discussion at the moment, at least it should be considered.

[James Hellyer]

Now I am no taxation expert, however surely it may be worth looking at the possibility of raising the personal allowance to £10k.

The problem with this - as Cameron notes - is that it doesn't benefit those on the lowest incomes, especially those who may not be earning. This is especially problematic as the lower income earners tend to pay overall higher marginal rates of tax anyway due the regressive nature of VAT.

[libertorian]

Negative income tax would be interesting, but would you actually be able to sweep away a number of other benefits, or would you just end up adding it to various present benefits and tax credits, thus making matters worse?

It's certainly worth discussion. What are peoples thoughts on it?

[Arthur]

On becoming 18 everyone would be given a 10k tax allowance. This is transferrable to next of kin. If at 18 you are in full time education, you can transfer it to a parent/guardian, so they could have a £20k allowance, to help pay for said education etc. On marriage or registered partnership, where one partner stays at home to look after children ditto.

National Insurance/Income tax would be scrapped: pension, health care would be paid out of general taxation, which would be mainly indirect.

Vat there would be varying rates. Services would be at a lower rate than comsumer goods. If Services were at a lower rate then the motivation to 'avoid' would decline.

Local taxes, Local authorities should be given more freedom to tax. If they over tax, people won't go and live in their areas.

Lets be more imaginative about taxation, income tax has been there since the early 19th century let's look at alternatives

[David Belchamber]

James Hellyer June 21, 2006 at 12:52: "The problem with this - as Cameron notes - is that it doesn't benefit those on the lowest incomes, especially those who may not be earning."
That is of course correct, James; people not earning as much as the personal tax threshold would still have to be helped with benefit (perhaps via negative income tax, as suggested above).
"This is especially problematic as the lower income earners tend to pay overall higher marginal rates of tax anyway due the regressive nature of VAT."
If the threshold were, for sake of argument, the equivalent of the subsistence level, say £9,000, then those earning that amount would not pay income tax or NI at all. In that case, VAT would surely affect them equally, irrespective of whether they were earning or receiving benefit?

[Shane Greer]

We need a strong statement declaring our commitment to cutting taxes, not a sidestepping statement that ‘we’ll wait to see what happens when we get into power’ (which the British people will read as ‘taxes won’t be cut and instead will probably rise’). Whatever happened to the relatively simple idea that people are much better at spending their own money than the state?

Building on Serf’s suggestion we should KISSAL:

Keep it simple, stupid, and low.

[David Simpson]

Scrap NI - it's deceptive, expensive, complicated (much more than tax to calculate and record if you're an employer) and a tax on employment. If you want to replace the revenue from business, increase corporation tax or eliminate business allowances (reduce complication) - that way firms will have a positive incentive to soak up otherwise taxable profits in employing people.
Apparent rates of personal income tax will have to increase but then people will really see what the state takes and why we only stopped working for it (the State) a few weeks ago.

[Julian Morrison]

(1) One single flat tax on income for people or corporations. Start it off "revenue neutral".
(2) Allowance above the breadline. Allowances to be transferrable in a breadwinner/homemaker marriage.
(3) Scrap capital gains, death tax, IR35, everything stealthy.
(4) Raise a middle finger to the EU and lose VAT entirely.
(5) Cancel PAYE. Require tax to be paid by cash, cheque, or direct debit. Make it so people see their money snatched away. Make it hurt.
(6) Then cut and keep cutting.

[James Hellyer]

If the threshold were, for sake of argument, the equivalent of the subsistence level, say £9,000, then those earning that amount would not pay income tax or NI at all. In that case, VAT would surely affect them equally, irrespective of whether they were earning or receiving benefit?

I think you're missing the point. With the current personal allowance, starting rates, and basic rates of income tax low earners pay a relatively small amount in income taxes, but as a greater proportion of their incomes are required for day to day purchasing, they will effectively pay a greater proportion of their income in taxation. In such circumstances, increasing the personal allowance to the amount yopu suggest would offer an annual saving of just £618, or £11 per week.

[cherry]

Cut road tax which is not spent on roads in any case and penalises commercial companies trying to compete with those in other European countries who do not pay road tax; reverse all Mr Brown's stealth taxes; cancel the BBC licence; cut back drastically on 'beanos', jollies' and so-called expenses which enjoyed by government ministers (at tax-payers' expense), all of which could be easily subsidised by stamping out fraud and corruption in the Social Benefits system!
Why not!!

[David Belchamber]

James Hellyer @ 08.22: " In such circumstances, increasing the personal allowance to the amount yopu suggest would offer an annual saving of just £618, or £11 per week"
I can't take issue with your figures but my point is that saving represents a tax reduction of just under 7% of their income for people in that category. I feel it would make a difference to them.
It would also take a large number of people out of tax and probably benefits as well.
On another note, David Simpson @ 19.49 suggested scrapping NI. As NI is virtually a tax, it might be interesting, if possible, to show personal tax and NI consolidated into one figure to demonstrate to middle income earners exactly how much Gordon Brown is now taking from them, compared with the state of play in 1997.