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Ouch: what a stinging article in The Business. It has always struck me that the Tory Party stands for two things more than anything else - national independence and a smaller state. It is simply untenable for us to whinge about Labour's tax increases if we then fail to have the courage to say we will cut taxes.

Tax relief is important to all Conservatives, but the problem is we struggle to sell the idea to the wider electorate. We may be in the right, but if no one believes you, then you won't get the support you deserve. How we go about advocating tax relief is critical, we need to ensure public sector workers that their jobs are secure, and that people won't wake up one morning to find the NHS budget slashed in two.

People are deeply suspicious, they now presume that lower tax rates, means a lower income, which is cclearly not true, it just demonstrates a lack of knowledge in economics. Before we start throwing figures around, we need to teach the public of the theoretical benefits to the economy of tax relief, without actually announcing we will cut taxes. What we want is forn the electorate to be asking David Cameron why he isn't cutting taxes, as opposed to asking him why tax ralief isn't going to harm the economy.

The Business has yet again produced a penetrative economic analysis. Its increasingly the must-read on a Sunday

Don't forget the Australian position, where a series of income tax cuts since 2000 has meant ever greater revenues each year, + growth and budget surpluses - another case of tax cuts actually driving economic stability.

From memory, George Osborne has always been weak on income tax cuts, but stronger on cuttting taxes for business. Dave has never actually given any indication that he knew what he was talking about on taxes.

Donal's comment is spot-on.

Chris: "Before we start throwing figures around, we need to teach the public of the theoretical benefits to the economy of tax relief, without actually announcing we will cut taxes. What we want is forn the electorate to be asking David Cameron why he isn't cutting taxes, as opposed to asking him why tax ralief isn't going to harm the economy."

This is a fair point, Chris, and some of us expect too much of the Conservative Party. It has to win an election in three or four years. It can't do all of the intellectual work itself. The wider conservative movement must do much more to make the case for lower taxation and that is why the Taxpayers' Alliance is such an important and promising new organisation.

What the Conservative Party must not do, however, is harm the tax cutting cause. The Osborne/ Cameron soundbite that tax cuts and stability are in some way opposed is undermining efforts to increase public understanding of the dynamic effects of lower taxation.

"we need to ensure public sector workers that their jobs are secure"

The problem is that *some* public sector workers would lose their jobs, under a Conservative government that was serious about controlling public spending.

In the USA differential wealth is tolerated, while in the UK it isn't. We have an underdog culture where the little guy is trying to keep up with the big guy.

The US is an overdog culture where the little guy admires the big guy, and believes that he too can get to the same level one day. In the UK it's assumed to be better to stop the big guy getting too big, and keep him in check.

Faster economic growth will increase the difference in wealth between the top and the bottom. British culture doesn't like that. Which is why Gordon Brown is more apporved of than seems sensible on the face of it.

It is not just a matter of education.

One reason why the Conservative Party may be slow to embrace the "lower tax rate for higher tax yield" argument is that it robs it of a stick with which to beat opponents. When the Liberal Democrats proposed a 2p cut in income tax, only partially offset by more environmental taxation, George Osborne couldn't risk the suggestion that the difference might be made up by the subsequent boost to the economy. So instead he went with the more comfortable "back of an envelope" line.

Sean states an absolutely crucial point: "The problem is that *some* public sector workers would lose their jobs, under a Conservative government that was serious about controlling public spending".
Under Gordon Brown, departments are heavily overmanned and therefore wasting taxpayers' money.
How can we propose greater efficiency and managerial competence without alarming hundreds of thousands of public sector workers - and their unions?
I do think though that it is time the tories starting talking about having people available who have actually had experience of running big enterprises (have we?)(compared to Nulab's lawyers and lecturers) and that the introduction of greater managerial competence would lead to significant savings for further investment and then tax cuts.

A sadly accurate article of the lack of intelligence occuping Mr Cameron and Mr Osborne on tax. By making an explicit statement that fiscal stability and tax cuts are contradictory, then Mr Cameron and Mr Osborne have allowed Labour to rewrite financial-political realities. Instead of advocating how tax cuts can improve the lives of individuals, or how tax cuts and fiscal stability and growth can occur side-by-side, the Cameroons have allowed Gordon Brown to be unchallenged on his own tax policy.

TaxCutter is right about what has occured in Australia. Both Australia and Britain have what some might call an "underdog" culture. But both are on the same economic cycles (with errily familiar political cycles as well) and have a growing immigrant population. Yet as Brown has gone for the high spending high borrowing route, Australia has gone for the tax cut and eliminate Government debt route. Already Australia has not only paid off ALL Government debt, but it has also signficantly cut taxes. Yet the greatest difference is political discourse. In Australia both the Conservative Coalition and the Labor Party talk about cutting taxes, yet in Britain the main talking point is increasing public sector spending. This has occured because the Conservatives have allowed Labour to dictate political debate.

I know, and that includes everyone else too, that Cameron is trying to emulate Blair. However do not forget that in Opposition, Brown was a competent Shadow Chancellor and developed strong economic credentials. In their first foray into economics, the same cannot be said for Cameron and Osborne.

Penultimate Guy wrote "George Osborne couldn't risk the suggestion that the difference might be made up by the subsequent boost to the economy. So instead he went with the more comfortable "back of an envelope" line."

But the LibDem's tax proposals were the back of an envelope job. Whilst cutting corporate tax was a good idea, the LibDems proposal to raise £13bn of additional capital gains from higher rate taxpayers was laughable. The rate on capital gains for higher rate tax payers ranges from 24% to 40%. Given that capital gains raises about £3bn per year, to raise £13bn from it they'll need to increase the top rate to 173%!

"How can we propose greater efficiency and managerial competence without alarming hundreds of thousands of public sector workers - and their unions?"

Most of the workers under threat would be the non-jobs advertised in the Guardian. Most people in these jobs are ideologically left-wing and wouldn't vote Tory if their lives depended on it.

Talking of examples of taxc cutting countries, I would, ironically, point to Sweden. They slashed their corporation tax rate to 28% which has helped them to attract significant foreign investment to fund their overgenerous welfare system.

http://www.reform.co.uk/filestore/pdf/negativeimpact.pdf

Check out page 6 for more proof of the benefits of lowering taxation.

Assuming that tax cuts help to stimulate economic growth, then it would be sensible to start by cutting taxes in those parts of the country where economic growth is most needed - ie generally in the north and west of the UK, rather than in the south and east. The immediate benefit for the Tory party in adopting such a policy would be to show that it is seriously addressing the economic imbalances across the country, and wants to tackle the chronic problems in the lagging areas, and not simply carry on with Labour's failed policy of shovelling in ever increasing amounts of taxpayers' money. The benefit for people elsewhere in the country would be lessened pressure of over-development in the south and east, and eventually the reduced need to supplement taxes raised in the lagging areas, once they've caught up. However I suspect that this kind of regional policy may at least need EU approval, or may even be entirely forbidden.

" What we want is forn the electorate to be asking David Cameron why he isn't cutting taxes, as opposed to asking him why tax ralief isn't going to harm the economy."
I agree with Chris and Tim on this.
And I think that Chris's point is already beginning to resonate with the electorate. They have seen their tax burden rocket under this government and are now beginning to realise that large amounts of their hard earned cash is being wasted. That will be what does the most damage to Labour's record on the economy.
I saw a story today on News24 about tons of holiday bargains because of various excuses like the world cup and wimbledon. Rubbish, booking a holiday to coincide with the school terms has always been expensive, it's just that people can no longer afford to pay those prices because their disposable income is shrinking. The tax burden under Labour has been increasing for years but now the effects are really being felt by the ordinary voter, ie your monthly council tax bill is beginning to look like a mortgage repayment and most people are now repaying some kind of loan or credit card, pension provision?, I just think that it is unsustainable.
I think that Chris's suggestion that the voter's might start asking for tax cuts is not far fetched, but also as Tim suggests the case for tax cuts has to come from a wider circle than just the tory party.

Portraying tax cuts as economy boosting is a great argument that will hopefully win us votes. Lets hope we get promised some large tax cuts by comrade Osborne in the near future

Yes, Yes, thats what I'm talking about! This country needs tax cuts. I would love nothing better than a full blown argument about whether this Party should be for higher or lower taxes. I want this argument and think this Party will benefit from such an argument in terms of forming a tax policy. Please Cameron let argument happen across the Party. I will of course be arguing in favour of a low tax Party. Cameron I beg, lets us debate serious policy, something with some meat. The CPF should be the driving force of the Party not the think tanks.

One bit of advice Cameron, the "hug a hoodie" message hurts a lot. Well done Cammie ol' boy, youve just alienated a whole lot of natural Conservatives. You may well have caused serious damage to the elections for 2007.

I rejoined the Party for the Association, not for Cameron. I couldnt care less about him. Im here for true conservatism, something hes abandoned, yet something this country begs for. Let the debate begin, Cameron?

"we need to ensure public sector workers that their jobs are secure"

The problem is that *some* public sector workers would lose their jobs, under a Conservative government that was serious about controlling public spending.
Sean, I agree that public sector jobs will have to disappear and therefore maybe I've have been better off saying "their future is secure". Its never too late for someone to go back to school and retrain, I just wish the government was trying to help more students get through university rather than penalising us poor middle class students with top up fees. The abandonment of the scrapping top up fees pledge was a mistake, as it would have handed us the student vote. The Lib Dems remain king of the student world simply for this reason.

What the Conservative Party must not do, however, is harm the tax cutting cause. The Osborne/ Cameron soundbite that tax cuts and stability are in some way opposed is undermining efforts to increase public understanding of the dynamic effects of lower taxation.
The "economic stability before tax cuts" soundbite is very vague, and the list of possible meanings is nigh on endless. You can spin those 5 words so many different ways that I don't know what Osbourne actually intended for them to mean. In one way it can be interpreted as saying that tax cuts make the economy unstable, whilst an alternate reading would make it a pledge not to cut taxes blithely without considering their effect on the economy first. After all, you eventually do reach a point where tax cuts do begin to eat into the governments revenue.

"After all, you eventually do reach a point where tax cuts do begin to eat into the governments revenue."

If we're fighting for a smaller state then we should be fighting for a reduction in government income and spending. The private sector is generally more efficient at spending and investing money than the government is.

If we're fighting for a smaller state then we should be fighting for a reduction in government income and spending. The private sector is generally more efficient at spending and investing money than the government is
All in good time though Richard, we couldn't scrap the NHS and income tax on the same day and just expect the private sector to be up and running health services in the country the next day. Unfortunately you can't play elections, like people play chess, thinking two elections ahead just isn't practical at this point in time.

What's the point of all this? Cameron and Osborne know all this stuff but have decided they can't get elected spouting it. As a result they are likely to be trapped in lefty-dom when in power, leading to serious political failure.

That is why I find it acceptable to go with my thoughts on Europe and fight for UKIP. Am I wrong? It really is depressing.

I'm not a Tory supporter but I'd be interested to hear what people's general views are the performance of Gerorge Osborne as Shadow Chancellor have been thus far? Has far as I can tell he has been pretty ineffective against Gordon Brown in Treasury Questions and the Pre-Budget report last year. Also when the Budget was debated in the media eariler this year his media contributions were rather poor. Are Tory members and supporters happy with him? Or do they feel he is only in his post because he is close friend to Cameron?

"Sean, I agree that public sector jobs will have to disappear and therefore maybe I've have been better off saying "their future is secure"."

I expect the public sector jobs Sean means are the non-jobs advertsided in the Guardian that do not contribute to society like nursing or policing do. The occupants of these jobs tend to be ideologically left-wing and wouldn't vote Tory even if the alternative was bubonic plague.

"I'm not a Tory supporter but I'd be interested to hear what people's general views are the performance of Gerorge Osborne as Shadow Chancellor have been thus far?"

I think most people feel somewhat underwhelmed by him although I hesitate to speak for everyone else.

I expect the public sector jobs Sean means are the non-jobs advertsided in the Guardian that do not contribute to society like nursing or policing do. The occupants of these jobs tend to be ideologically left-wing and wouldn't vote Tory even if the alternative was bubonic plague.
... and therefore don't deserve to have jobs? Public sector workers belong to the unions which still wield an immense amount of power. The country coming to a halt because we sacked 500 nurses because "they'll never vote for us anyway" shouldn't really be top on our priority list. I do sometimes like to think that not all governing has to be political.

[email protected]:40
Don't underestimate George Osborne, I think he has very successfully managed to undermine Gordon Brown as a politician over the last few months. It was some well placed comments by him which certainly got me thinking! I also think that some of those comments have stuck and its shows in Gordon Brown's personal ratings.
I think that GO is an astute politician and a valuable member of team Cameron.

I expect the public sector jobs Sean means are the non-jobs advertsided in the Guardian that do not contribute to society like nursing or policing do. The occupants of these jobs tend to be ideologically left-wing and wouldn't vote Tory even if the alternative was bubonic plague.
... and therefore don't deserve to have jobs? Public sector workers belong to the unions which still wield an immense amount of power. The country coming to a halt because we sacked 500 nurses because "they'll never vote for us anyway" shouldn't really be top on our priority list. I do sometimes like to think that not all governing has to be political.

In a televisual age, George Osborne's voice detracts from his impact (as Maggie Thatcher's did at one stage). How many people will actually read what he says (which on the whole seems very sound)?
If he had some voice training, he might sound much more authoritative.
In five years time, I believe he will be very good but for the moment I fear that he comes over as too lightweight and we need someone with much greater presence as shadow chancellor.

"The country coming to a halt because we sacked 500 nurses because "they'll never vote for us anyway" shouldn't really be top on our priority list. I do sometimes like to think that not all governing has to be political."

We're not talking about sacking nurses. We're talking about sacking outreach workers, smoking cesation officers and other busybodies. If they went on strike nobody would notice apart from the poor souls who are constantly patronised by them.

Perhaps I didn't make myself clear enough in my original post. I was distinguishing useful jobs like nursing from non-jobs like a "Community Compost Development Officer" (salary: £23,739 - £25,857 pa).

"If he had some voice training, he might sound much more authoritative"

IDS anyone?

Yes the USA has had huge amounts of equity withdrawal to fund consumption - then again they do impose Capital Gains Tax on housing...............so maybe if Britain switched to imposing CGT on houses it too could cut other taxes

"In five years time, I believe he will be very good but for the moment I fear that he comes over as too lightweight and we need someone with much greater presence as shadow chancellor"

I agree. My preference would have been David Willetts.

The jobs might be useless, but until we are in a position where the people being made redundant are able to find new jobs, we are simply driving up the numbers are unemployed. I'm all for getting rid of public sector workers who have no purpose and are a waste of money, but I believe its also our duty to help them be ready to find new jobs.

A conservative government should provide policies that work together in order to achieve the end goal of a smaller, more affluent state. We can't just pick the policies that look easy, and don't require investment on our part. We tried this to some extent in the 80s, when we privatised industries which gave us a quick boost in income, but overall we lost out. We need to look to the future, not only to ensure re-election, but to ensure that future generations will have a decent country in which to live and work.

Chris, surely it depends how you reduce the number of people in "public sector non-jobs"?

The sensible way forward would be not to indulge in firing people but simply don't hire any more smoking cessation officers, 5 a day co-ordinators etc, and eventually the numbers would fall as people retired, left, and so on.

Yorkshire Lad, its strategies like the one you've outlined that should be employed. The problem always has been, is that we get selfish and don't stop to think of sensible ways to save mon, we just go for the quick and easy ones. We did this during the late 80s, we just kept on cutting more and more and more as we made ever more extravagant promises of tax cuts (I don't have a lot of personal knowledge from the era, I was only born in 1987).

I hate to be the one who disagrees somewhat with the views here.

While tax cuts per se are a good thing, income tax/capital gains tax rates are not currently at the insane levels of the 1970's.

The US is running a deficit with the rest of the world of over 6% - which is fuelling growth - they also have a 2.3% ongoing federal government deficit (and many states are running deficits on top) - around a 9% injection into the economy.

The states you have listed have the fastest growing populations within the US, which probably boosts their growth rates. (Arizona’s population is growing by 3.5% - highest in US and that is a lot of houses being built and a lot of knock on economic activity – though low taxes may be one reason people move there!)

Tax cuts probably do boost economic growth – I am not denying that. But the idea that simply cutting taxes will lead to an economic boom is misplaced. Ireland has for years been building up infrastructure on the back of EU funds and so could afford to cut back its government spending.

The problem is that as people get richer they will always want better services
to go along with this. Last time we were in power, we kept spending more on health and education – yet the “24 hours to save the NHS” really hit home.

We need to therefore push the point that we accept that we need to provide decent public services, and that we will fund these particular areas properly. But we will use the power of the private sector to deliver much more efficiently the core public services and cut back on the wasteful parts of the private sector.

If the public see us as efficient then they will believe we will be able to cut taxes and deliver core public services. Thatcher didn’t manage to cut taxes that much at all in her time as a share of GDP at all. She focused on long term structural problems which led us all to benefit – and laid the foundations for the economic growth of the present.

We should therefore focus on the long term structural problems of a wasteful and inefficient public sector, and an overcomplicated tax and benefit system which discourages economic growth more than marginal tax rates.

Simply indulging in the idea we will slash taxes on day one and all will be well is a recipe for disaster and probably won’t win over floating voters in any case.

Both the Bush tax-cuts and the Aussie tax cuts have poured too much money into their repective economies, stoking inflation. As a result interest rates are up - to 5.25% and rising in the USA and to 5.75% and rising in Australia. That should put severe pressure on homeowners, cancelling everything they've gained from the tax cuts and more.

Is this what Tories are aiming for? Anyone with a mortgage had better not vote Tory!!!

"Both the Bush tax-cuts and the Aussie tax cuts have poured too much money into their repective economies, stoking inflation."

Tax cuts do not create inflation. While some prices may rise as a result, others will fall (due to less government spending) thus balancing them out.

The slogan 'economic stability before tax cuts' would be improved by altering it to 'social stability before tax cuts'.

That's the underlying message from Cameron's Birmingham speech reported yesterday.

"The slogan 'economic stability before tax cuts' would be improved by altering it to 'social stability before tax cuts'."

That is of course providing one presumes the current size of the state promotes social stability. I don't see much evidence of that. Quite the opposite in fact. One example: which institution has undermined the family by trying to take the place of the father? Answer - the state.

Yorkshire Lad suggests David Willetts as a possible shadow chancellor. Has he (David Willetts, I mean) got a grasp of economics? What about William Hague, as another suggestion? Either way, George Osborne should be the number two, because he is very good - just not impressive yet.
There might - or might not - be a GE within the next 12 months. We have to be ready for it if there is and therefore DC should have a minor reshuffle to get his heavyweight performers (and he does have a few) in the right jobs now, so they can be on top of their brief by the time the tories win.

Richard: "tax cuts do not create inflation"

ANYTHING that pours money into the economy, whether slashing taxes or slashing interest rates causes inflation - the economy can't use the money, so it goes straight into prices.

The fact that you don't understand this shows that you and other Tories don't understand what happened in the late 80's/early 90's. Tax-cuts, which poured money into the economy, causing a temporary boom followed by a huge bust. (If you have any doubt about this, look across at America where the same scenario is being played out again). Tories are in denial about what happened, which is why the voters don't trust you into power - they fear you will repeat the same mistake.

Tories didn't lose the 1997 election because of sleeze - they lost it because they lost a lot of people a lot of money. It's the "unforgivable" in politics. No one wants a return to boom and bust. Having 20% growth followed by a 20% contraction seems attractive to Tories only. Under Labour by contrast, they've had a decade of calm, steady growth and no wild swings. People with mortgages will vote Brown in.

Chris, surely it depends how you reduce the number of people in "public sector non-jobs"?

One painless way to reduce the size of the public sector is simply to put a freeze on all PS recruitment for 18 months after we take power. The public sector has a natural wastage of at least 10-12% pa. With some proper HR management, all vacancies could be filled internally by re-assignment. Outsourcing should be widely promoted, ensuring that the jobs are transferred to the private sector with the standard safeguards.

last ranger, as I was saying to Yorkshire Lad it is entirely dependent upon how we reduce the number of jobs. I'm just not confident that we will be able to hold back from going crazy and just making people redundant in a reckless manner, just to cut expenditure.

I'm no economist but I would strongly advise against following the US economic model.

As the article itself briefly mentions, the US is in debt up to the eyeballs, with the Bush administration effectively sitting on an economic timebomb of its own invention.

The means by which the US economy has achieved this amazing 'growth' that the Business dribbles about is something I would not like to see replicated here:

- large corporations, perhaps following the lead set by the government, have been borrowing unsustainably and irresponsibly (General Motors and Ford being the two most obvious cases that spring to mind);
- US industry is propped up by generous subsidies and prohibitive barriers imposed on imports (despite George Bush's infamous claim that "more and more of our imports come from overseas");
- manufacturers increasingly employ illegal immigrants on deeply unfavourable terms of employment and in appalling working conditions, in the knowledge that this plentiful supply of cheap labour is hardly likely to complain...

I could go on and on but I'm meant to be working so I won't!

P.S. I see our old friend, the 'Irish tax cuts model', has popped up again - all I have to say on this is that it's far easier for a small country being propped up by generous handouts at the expense of taxpayers in more prosperous European countries to cut taxes than a larger country which has more complicated economic commitments.

Economic stability before tax cuts is a very worthy notion, and refreshing to see.

People may have forgotten by we have a rather sizeable and growing fiscal deficit in this country (thanks to 'Prudence' Brown). Dealing with that is perhaps the biggest single economic job any future government will have to deal with. It will not be dealt with by taking an axe to income tax. Raising green taxes and cutting business taxes might be better idea, but slashing the share of GDP taken by government isn't the root out of the current mess.

I can't quite believe there are so many Tories who are so unconcerned by dangers of rising inflation - a dragon that took 14 years to slay last time around.

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