Cameron should embrace Forsyth

Martin Vander Weyer has written an excellent article for today's Daily Mail (not online).  He reviews Gordon Brown's great tax squeeze on Britain's middle classes and the declining tax competitiveness of British business.  He provides a reminder of the extent of Labour's tax grab:

• The fact that our tax burden is rising faster than any other EU nation and has just exceeded that of Germany;
• The £5bn-a-year raid on pensions that has reduced the value of retirement funds by at least £100bn; and
• The failure to raise tax thresholds in line with inflation so that 1.2 million more people have been caught in the 40% tax bracket and that inheritance tax cuts in at £285,000 when indexation to house-price inflation would have put it at £430,000.

The article could also have mentioned soaring council tax and the many other stealth taxes that Gordon Brown has imposed.  Steadily and surely Gordon Brown is undoing the good of the Thatcher years and a sharp change of course is needed if we are not to return to our high-tax and high-waste past.

Taxes from Whitehall and regulations from Brussels are sending Britain further and further down the competitiveness league table.  It is extraordinary that Britain's Conservative Party chooses this time to stop talking about tax and Europe in any meaningful way.

I hope it's not too late for David Cameron to change emphasis.  Later today the Tory leader is giving a speech on tax simplification.  I hope the speech moves beyond generalities and embraces the thrust of Lord Forsyth's Tax Commission and the imminent publication of its findings.  If the Conservative Party is to avoid a dangerous challenge from a low tax party at the next General Election - perhaps birthed on the internet - it needs to listen to Lord Forsyth.

Related links: Will the Forsyth Commission water down its report? and Charles Elphicke and Stephen Hammond MP on Taxcutters versus stabilisers?

Comments

[Mark Wadsworth]

"birthed on the internet"?

Does he mean the Taxpayers' Alliwance or UKIP?

[Curious]

If DC does now come out in a strong way for tax cuts - what will all the Cameroonies say having spent the last year attacking "headbangers" on this site?

[hf]

But cutting tax does not feature in the top priorities of voters.

First the voters need to be convinced about it and that cannot be done by the Party.

[Tam Large]

It is typical Blairism, to ignore a report that doesn't fit the "message". If Cameron folowed this erudite and comprehensive report and its conclusions, we would be back on the road to revcovery - in the country and in the Party.

(When I saw the title, I thought the article would be asking if Cameron should follow Frederick Forsyth on EU policy - I would support that too, it would ensure out election, and give us back control of our country).

[Chad]

This is a red herring.

I simply do not believe that Cameron can fund all his spending promises without raising taxes.

I look forward to him try to explain how he can fund all these promises that Labour is compiling on his behalf without raising tax.

Cameron himself has made a point of detailing how people hate politicians who break promises, so he will clearly deliver the increased spending in all the areas he has promised, so the question outstanding is how will he fund them?

[John Hustings]

Anyone who wants lower taxes, less immigration, tougher prison sentences and an end to political correctness is apparently a "headbanger".

That's the vast majority of the British public then.

[local copper]

as a policeman, and a public servant, my colleagues and i are the recipients of huge amounts of this tax.
even as a conservative, i'd have no problem with that - some things are best provided by the state in my opinion, and the police is one of them - if it didn't all get wasted.
last week i attended morning parade and was one of only three response officers there.
down the corridor, the offices were full of other police officers doing paperwork, meeting targets and planning strategies.

there's nothing inherently wrong with tax in a modern society but it has to be at the right level and it has to be spent wisely.

pc david copperfield - of coppersblog - puts it better than i ever could in his new book ("wasting police time", i urge you to buy it, it will open your eyes): "Our government wastes so much of our money, which it collects as tax, that it might as well be burned in open pits outside local revenue offices."

it's a brilliant book by the way!

[Opinicus]

Cameron has nailed his colours to the mast of Blairism and the consensus is emerging quite quickly that Blairism or in this context Brownism is a busted flush. How can he oppose Brown at the next election if he has decided to keep saying that he supports his spending and tax decisions and would carry on with them if elected. Why vote Cameron if you want Brown?
I think we are seeing one of those periodic turns of the tide in political zeitgeist and Dave is in severe danger of being caught covered in seaweed.

It would make a Puritan laugh.

[ratbag]

The Telegraph today reports an (inspired?) suggestion that Osborne will remove stamp duty on share transactions to bolster London's position as the world trade centre and help pension funds..

OK but a strange priority nevertheless. for those objectives

[Mark Wadsworth]

John Hustings.
1. Anybody who even mentions the word "immigration" must be a racist.
2. Even Anne Widdecombe knows that.
3. Being a racist is a Bad Thing.

The ultimate logic of all this is that the only way to prove that you are a Nice Person is to want to get rid of all restrictions or controls over immigration.

A bit of a quandary, I must admit.

[Opinicus]

@hf

But that is the purpose of a political party, I thought.

Do we believe that tax cuts are good for Britain? Then we should go out and sell them to the voters.

Dave is in danger of fighting the last two elections not the next one, which is the default behaviour for old-Etonian generals :)

Voters are not anti tax cuts but they dont believe that any Party can offer them without making cuts in desired services. We need to show how that is possible.

[Chad]

Cameron and Osborne have repeatedly stated that they cannot promises tax cuts now as they do not know what state the economy will be in, in 2009.

OK, but with that big unknown, they are still promising upfromt millions or billions of pounds of new spending.

Following their own logic, they can only be planning to raise taxes to pay for this spending, or are making unfunded promises.

[Opinicus]

@Chad

You're supposing there is logic!?!

[Chad]

I'm trying to find the truth Jonathan.

If Osborne is basing these large spending promises on a projected state of the economy in 2009/10 then clearly he could equally promise tax cuts too off the same projection.

They can't have it both ways.

If there is no such economic projection base, then the spending promises must be either unfunded or based on tax rises.

[TomTom]

Council Tax is unsustainable - I pay 2.5% VAT extra plus Council Tax for non-existent services. This will have to be reformed.

Why Jemima Goldsmith can live in an £18 million home, Lakshmi Mittal in a £70 million home, and Abramovitch in various homes costing millions - and yet pay only nominal Council Tax is an affront to every pensioner jailed for non-payment

[Ted]

ratbag

Gordon is today meeting Business to try to stop them setting up in Ireland etc because his taxation/regulatory regime has destroyed our competitiveness. Osborne gives his support to a tax change that directly improves Business conditions - well targeted strike to show Tory party is Business's friend.

I expect we will not get much move from "sharing proceeds of growth" but will get particular targeted tax breaks (inheritance tax, increased thresholds etc.) plus perhaps an agreement to a direction in line with Forsyth.

[The Big Turn Off]

Oooooooohhh!!!! I'm so excited!!!!!! Another slight nuance of a shift where you read between the tea leaves in the space time continuum that is politics of the Labour/Tory dimension that inhabit the ether world of planet zarg. Angels on a pin woud be far more interestng...........

[clive elliot]

If there are going to be changes in tax regimes which produce some tax cuts, then I think Stamp Duty on share transactions, stated to generate £4m, is just about the worst way of giving something back. The average voter will not see one iota of benefit.
Such money if available would be better used in such a way people see the benefit, eg raising income tax thresholds, or house purchase stamp duty etc.

[Geoff]

Why Jemima Goldsmith can live in an £18 million home, Lakshmi Mittal in a £70 million home, and...

Each of those people uses a similar amount of local services to you. In fact, certainly less than you - have you ever seen Mrs Goldsmith in your local library? George Clooney has a house in the UK and the first time my better half spots him in a public swimming pool then I'm in very big trouble.

If we all use roughly equal services then we should all pay equal amounts. Fair, eh? We could call it a Community Charge or something like that.

A few morons throwing bricks at police officers a few years ago hasn't been enough to convince me that the theory wasn't sound - even if it was 'sold' so atrociously.

[real conservative]

Cameron and Osborne don't see the value of tax cuts because they have never needed them in their lives. Their life of trust funds and inherited wealth means that they do not understand the needs of ordinary voters.

[Mark Wadsworth]

Geoff "if we all pay equal services we should all pay equal amounts" is fine in principle, but continuing your logic, there'd be no free State Education or NHS and so on anymore. Some here would be in favour but most people wouldn't like it.

Remember that Council Tax is only about a quarter of local authority funding - the rest is grants from Whitehall (including recycled business rates). So average poll tax would have to be about £2,000 per adult if all "local services" are to be paid for this way. Again, politically a bit of a non-starter.

TomTom, of course Jemima Khan should pay council tax based on the value of her home with no upper limit (like in Northern Ireland from next year), seems fair to me BUT by the same token, Inheritance Tax and Stamp Duty Land Tax should be scrapped to even things up. Nulab conveniently forgot the second half of this equation in Northern Ireland.

[TaxCutter]

I think it might be best to await what the TRC's findings are before commenting on them. It notable that Gordon Brown is claiming to make the UK more competitive today, which is a bit rich coming from a man who has spent the last 9 years doing the opposite, its purely spin to try and steal some of tomorrow's limelight and make him look more centrist.

[Ted]

Mark
Is it still true that it's only a quarter of income with move of most Education funding to direct to schools from Government - I was surprised looking at Wilts/Salisbury how much of their expenditure was now covered by council tax/business rates?
Thouh NI proposal was one that it was agreed would be dropped providing the Rev Ian agreed to St Andrews (Blackmail? moi? says Hain)

[John Moss]

The problem with this debate is that it is framed against a "given" that the way things like health, education and welfare are being done can't change.

Surely it is the responsibility of an opposition to work out where the current government is failing, devise and promote new ways of doing those things governments need to do, then work out how much they will cost and set their tax regime to suit.

For far too long, we have gone on about tax cuts as a political end in their own right. This plays straight into the hands of Labour and Lib-Dems - and their friends in the media - who, because of their blinkered, socialist outlook, can only ever see things in the context of state spending being a good thing in its own right and can simply shout "Tory Cuts" and frighten the electorate.

I'm on record as stating that Cameron's abandonning of meaningful reform of healthcare is a mistake, because it makes the NHS - all love be heaped upon it - an arguement about who will spend what and we will never beat Labour on that ground. If we demonstrated that reforming the system to do "X", whatever "X" may be, would mean that it would cost "Y" and that we would then do "Z" with the tax regime to pay for it, we might be seen as a credible alternative.

I hope Forsyth isn't going to simply propose "Tax Cuts". I hope they will be demonstrating that a different structure can generate just the same amount of tax revenue, by simplification. However any arguement about what is raised and how it is raised is still spurious unless we agree first what we intend to do with it.

[Ratbag]

There are two aspects IMHO about tax-cuts:----
1. Without taxcuts for business the economy will soon cease to be competitive and then everything else is pie-in-the-sky

2. There is a crting soicial-justice need to get the lowest paid out of tax altogether and thus make them independent once again of state handout and stop state dependency.

I hope this report wiil signal some Conservative reaction from the Party's leadership. I have no confidence that it will do so. For I am still waiting for a definitive statement from Cameron on the multiculturalism (say "veils" !! ) debate or any recognition that the army is criminally ill-equipped.

[Geoff]

Mark: is fine in principle, but continuing your logic, there'd be no free State Education doesn't follow from my argument at all.

You pay a flat rate. It pays for every householders' bins to be emptied, your library to hold 20-year old books, your streetlights to work, the Council swimming pool water to be an attractive shade of yellow and a local Health and Safety fascist to turn up and have the 100 year old trees in your road cut down because they have conkers on them and children might throw sticks up there and injure passing pussycats.

Jemima Goldsmith is actually getting ripped off and should ask for a rebate.

[Mark Wadsworth]

Ratbag. The effective tax on benefit claimants is hideously high because they are paying tax and having benefits withdrawn.

It is perfectly easy to get round this. Tot up total benefits paid out, divvy it up among low- and non-earners as a fixed amount; scrap ALL means testing BUT not let them have a personal allowance for tax as well.

For average and higher earners, the personal allowance would be at least doubled so that there is no cliff edge problem where you go from being a low earner to average earner.

That way everybody has the same marginal tax rate.

[Paul Kennedy]

With regards to business taxes, maybe we should look at cutting the tax on employment, that is employers NI, currently levied at the rate of 12.8% on earnings over £97.01 per week, and the irony of it being paid by state employers who are funded by taxation is not lost upon me.

That being said and as I have said before, such will be the state of the country's finances that we inherit, and will have to sort out, that in the short term, we will be lucky to maintain taxes at the overall level they are, never mind reduce them. I happen to think that such is the waste and inefficiency within our state sector that I would not be surprised that with hard work, effort and tough decision making we could not come up with £50 billion (about 10%) of annual savings in the medium to long term.

In my discussions with people, it is not paying taxes that they hate, it is the waste of taxes.

[David Boothroyd]

The Council Tax is the absolute antithesis of a 'stealth tax'. It is an utterly crude tax, and it is about the only one where one single tax bill for the whole year lands on the doorstep of those liable. I do wish that a phrase which has now become a cliché should not be applied where it is utterly inappropriate.

The real stealth taxers were Margaret Thatcher, Geoffrey Howe and Norman Lamont for putting up VAT so much. VAT is the ultimate stealth tax. You pay it every time you go to the till.

[George Hinton]

Van Der Weyer is articulating what many of us know and have been saying for ages, but our voices have been drowned out by the disinformation spewing forth from NuLabs propaganda machine guns.
Now will Dave stand up and start making the right noises, to an increasingly taxed and concerned public, that he will look after our interests, indeed the interests of business who employ the public and who will be mightily pissed off if we all lose our jobs, because they have gone to a cheaper continental nation.
I must reiterate the point, the duty of an opposition is to oppose, everything.

[Gareth]

"Cameron and Osborne don't see the value of tax cuts because they have never needed them in their lives. Their life of trust funds and inherited wealth means that they do not understand the needs of ordinary voters."

Golly, the Workers' Revoltionary Party is here. Down with the moneyed classes!

[come off it]

Golly! Gosh! I say!

Supporting lower taxes is somehow related to the Workers' Revolutionary Party? Er, try Mrs. Thatcher's Conservative Party.

Admittedly it's hard to find out too much about those days in the current party, but that was when the party increased the rewards for working for those who make their own way in the world without the benefit of daddy's bank account or mortgage-free houses in Notting Hill.

[Jon Gale]

God, the comments from the headbangers just get worse.

"Sharing the proceeds of growth between investment in public
services and tax reduction." (the exact words in BtL) involves tax reduction. It says it there in black and white.

The "stability before tax cuts" thing is explained very clearly in the Platform piece "Tax Cutters versus Stabilisers" yesterday, especcially the last two paragraphs.

From yesterdays piece:

"...£50Bn a year. The stabilisers might argue that half of this amount should go to reducing borrowing and then reducing taxes while the tax cutters would be delighted to have a pot of tax cuts to consider. So is the gap really that great and is there room for a stable tax cuts accommodation?

On the face of it, applying the judgement of Solomon analysis, the tax cutters would be delighted to have a pot of £25 Bn of tax cuts to play with. However, the fly in the ointment is that the stabiliser wishes first to get public borrowing under control. So the real issue is therefore likely to be where the balance is to be struck between reducing public borrowing and reducing taxes in the Tory Government - and the potential accommodation lies in the balance being struck at a point that both the cutter and the stabiliser can accept."

You Headbangers get called headbangers because you seem to think its is a black and white strugggle between "real" conservatives who want tax cuts and Stalinist out-of-touch aristos who are set against lower taxes. The '70s class-war language is just the perfect icing on the cake.

[TomTom]

have you ever seen Mrs Goldsmith in your local library?

She was Miss Goldsmith then Mrs Khan BTW...........I had no idea she could read, I thought that's why she dropped out of Bristol University !

Then again she acquired her wealth by birth not effort, which I suppose in Geoff's world is the ultimate Conservative virtue

[Mark Wadsworth]

Paul Kennedy - well spotted. For some reason CBI and so on always yap on about corporation tax rates and nobody ever mentions national insurance (NI).

Research has shown that there is a correlation between extra payroll taxes like NI and unemployment. Countries with low payroll taxes have low unemployment and vice versa.

So scrapping it would be an all round winner - cuts costs for employers, increases employment. And makes UK labour 10% cheaper, so 10% more productive and so on. And makes running a payroll simpler.

A third of the upfront cost of scrapping NI would come straight back in higher corporation tax receipts (lower payroll costs = higher taxable profits). The savings in welfare payments would make up roughly another third and the rest would be recouped through more economic activity.

But people have been conned into believing that "NI goes towards my pension". It doesn't. It is just tax pure and simple. Even without NI, it is possibel to maintain the contributory principle by keeping a record of tax paid, rather than a record of NI paid.

[ratbag]

Mark - Ingenious scheme and certainly (subject to letting the accountants crawl all over it) meets some of the bill.

But there's the snag that they are still claimants on the state = dependancy - rather than keeping what THEY have earned. =INdependancy

But I hear a noise from Victoria Street - a chorus of "Why do they bang on about taxes all the time. (and a solo---) What's the problem? My accountant has arranged things so that I don't have such things to worry about. Why don't they do the same?".

[Patsy Sergeant]

hf @ 10.30 and Jonathan @ 11.01 - why do we have to even mention ANYTHING abour lowering taxes, when what we should be doing (as Donal Blaney suggested) is banging on and on and on and on about all the taxes that this Chancellor so enjoys imposing on taxpayers! Why even Murdoch's press has articles - long ones - on the subject now.

All the time WE waffle on yea or nay about raising or lowering taxes, Brown's grin will get larger and we (the public - taxpayer - not Browns layabouts of course) will have to pay taxes in new ways.

People are discussing the Goldsmiths et al and their large houses. I thought I had read during the last week or two that Brown is devising new taxes for MIDDLE Englanders who have 'improved' their houses - put on conservatories etc:, it that comes into effect, surely it would not be unreasonable to ascertain whether these super-rich actually pay on the same scale as middle england. Ok they may not have had 'improvements' done, but is their house/council tax really calculated in the same way as smaller houses?

[Mark Wadsworth]

Ratbag, as far as welfare goes, the hard-right Tory line is benefits are too high, which is the case for some e.g. Mrs Hook, but not for everybody. I'm not sure if promising to scrap or reduce all benefits is a good idea, politically or otherwise.

The more thoughtful reformer (including plenty who have posted on this site) worries about the total tax/benefit withdrawal rate. This marginal rate is what discourages work. For most unemployed, unless they can jump straight in to the middle of the "ladder of opportunity", there is not much point financially. And a "universal benefit" scheme would sort most of this out at neutral cost.

George Osborne said that the bottom rungs of the ladder are missing, which is quite a good phrase.

Plus it would be nice to see the Tories run rings round the Goblin King on sensible welfare reform. The end result of what I have suggested (and I am a chartered tax adviser) would be that the completely idle are a bit worse off, but very low and occasional and part time workers would be better off, and so on. The missing rungs would be back in place.

And you'd be able to sack one or two hundred thousand people at the DSS!

[Opinicus]

I strongly support Mark's Citizen's Wage. The opportunity for one universal benefit to replace all existing benefits and to be given to everyone delivers huge administrative savings and eliminates the poverty trap. We don't need a DSS, we don't need Work and Pensions, we can privatise the Labour exchanges. We do need identity cards in order to ensure the Wage is paid only to true Citizens, which I know is not popular here. It does churn a lot of money but the net result must be the same as now because a Citizens wage provides the minimum needed to get by on. It replaces the state pension giving those over 65 a larger wage. For people in work it would be an in and out transaction on their PAYE and is effectively their personal allowance and it offers the perfect opportuniy to restructure the tax system into a flat tax structure. Best of all would be to pay for it with a hypothecated flat Social (income) tax, which means that commentators could point out the increase in Social tax necessary to fund an increase in the Wage.

Chances of Dave doing anything so radical - Zero.

[Opinicus]

David Boothroyd - you are the Labour councillor on Westminster Council and a long way from home on this site.

[ratbag]

reading Jonathan on Mark's suggestion makes me wonder if I understood Mark correctly the first time!!! If Jonathan has merely explained it better and not altered it, it's my fault because I have moved from a cautious supporter to a strong one!

But The Great Green God at the head of the Party isn't interested in things that matter like the miltitant tendency in Islam or equipment for adequate defence forces - or the poverty trap that so many of our people face

[Stuart Raven]

This "initiative" by Osborne is about as thrilling as Cameron's unintelligible NHS announcement earlier this month, which has already sunk without trace.

Will somebody tell me what qualifications - other than being the heir to a 17th Baronet - Wee Geordie Osborne possesses for the Chancellorship?

[Ted]

Mark & Jonathan

Why not go the whole hog - abolish NI and introduce a Citizens Pension as in New Zealand (we have the silly situation where we give pension based on years you "put in" to NI then top up income with complicated benefits those who haven't contributed enough years adding more bureaucracy & cost). Another lot of unnecessary bureaucrats off the payroll and recognition that stay at home mothers are as deserving as those who worked.

and get rid of all those irritating taxes (see Irwin Stelzer) on things like personal use of Blackberries (I refuse to have one) so we have just a few taxes universally applied - income tax on pay & benefits provided by employer, excluding items under X, capital gains, property tax, VAT/Sales, corporation tax and. I suppose, duties on wine/spirits/fuel/cigarettes though I'd like to see these as just highest rate VAT (though EU grabs that so perhaps not). Then put in a simplified tax allowance structure, with automatic adjustment for inflation and transferrable married couple allowances. Maybe replace those with a simplified Citizens Wage based benefits system incuding support for children.

Result a short budget statement and very difficult to hide stealth taxes.

I'm not too concerned about ID cards for "true citizens" - perhaps it's just a one off registration to prove you are resident or have a work permit - some of those unemployed ex-IR staff could be re-employed in governance.

[TomTom]

Ted, the National Insurance system was an insurance based system until unemployment in the 1930s made it insolvent and in need of govt funding (as in Germany at present) - Chamberlain pumped a lot of govt funds into keeping it afloat - it was a self-balancing fund so any shortfall meant cuts in benefits.

The system only works if most people are contributors - lie any insurance scheme

Your proposal has merit - the worst option is to continue with the current Ponzi Scheme which is cheating many people..........the problem is that the Treasury intends to means-test the basic State Pension just as soon as we get used to Tuition Fees and NHS Bed Charges

[Nicholas Slide]

The whole paper is now available at www.conservatives.com

[gordon-bennett]

Why not have one single tax - an income tax.

At the moment Chancellors can disguise the size of their take by stealth taxes scattered all over the place.

If a politician wants some money from me so that he can get the credit for spending it, let him have the guts to tell me exactly how much he wants and exactly how he is going to spend it.

[David Boothroyd]

So what? I read the comments policy and it didn't say you had to be a Conservative to post. I thought the Cameron Conservative Party was supposed to be open and welcoming.

[Yet Another Anon]

Both Forsyth's - Michael and Frederick, but the proposals of Michael Forsyth are a step in the right direction.

[Yet Another Anon]

Why not have one single tax - an income tax.

At the moment Chancellors can disguise the size of their take by stealth taxes scattered all over the place.
Bringing together taxation of Capital Gains and what is now classed as Income and having perhaps a single Personal Allowance at average annual earnings and having a flat rate perhaps as low as 10% and reducing taxation is one thing, but there will always be a plurality of taxes even if it is rationalised to far fewer than now, having taxes on Land and VAT will always be neccessary to raise sufficent amounts of revenue without overly burdening one group.

As to National Insurance, it has to go back to being only for funding extras for it's contributors, it has been reduced to being simply for payments at the same amount or even less to people but with a more generous test of income and that wasn't what it was intended for, either that or it should be scrapped - people should only get what they pay for in the system.

[Justin Hinchcliffe]

I suspect that the Leadership, like me, favour new green taxes but wants to see the general tax burden lowered. That makes sense. Let's introduce a flat tax but new taxes on those who pollute.