New Tory policy on tax

I've just listened to Radio 4's World at One (Wato) and heard George Osborne's emphatic insistence that the Conservative Party will promise no unfunded tax cuts at the next General Election.  That concession amounts to a huge ideological victory for the political left.  The Conservative Party's Treasury spokesman has effectively abandoned any attempt to persuade voters of the dynamic or supply side benefits of lowering taxation.  The promised reductions in business and family taxation will all be paid for by higher green taxation.  Environmental economist Professor Stephen Smith told 'Wato' that it is unlikely that green taxation will yield much more than £2bn to £4bn in extra revenue without becoming very regressive.  That leaves little room for any significant reductions in the tax burden on pressurised families.

The real question on tax is not whether we can afford to cut taxes (we can given the waste in the public sector, the supply side benefits of lower taxation and the possibilities for reducing the demand for government) but whether we can afford not to match competitor nations' lower tax regimes.  Lord Forsyth has just told Wato that his Commission's £21bn tax relief package only reverses one year of Gordon Brown's tax rises.  The Taxpayers' Alliance says "if all the report’s proposals were implemented tomorrow, the tax burden would still be higher than in 2003".

Mr Osborne's decision to rapidly distance the party from the Commission's recommendations also raises questions about the Tory leadership's willingness to embrace equally serious recommendations from the other policy groups.  What is the point of appointing these commissions if their results are so quickly disowned?

>>> For a more positive view of Tory tax policy see Watlington on the SAU blog.

Comments

[Jack Stone]

David Cameron as a right to ditch Lord Forsyth commission`s recommendation firstly because he didn`t set up the commission Michael Hoaard did which means he is under no obligation to take on the commissions recommendations and secondly he was appointed leader to take the party back to power and these recommendations simply would lead to defeat not victory.

[Michael McGowan]

There is of course no point in what you describe as "victory", Jack, if all you are going to do is perpetuate the failures of your opponents....but I assume that does not bother you because you regard those failures as successes.

The Commissions are mere talking shops: a largely sham New Labouresque "consultation" exercise. Their views will only be adopted if they chime with the left-leaning statist thinking of Cameron, Osborne and Letwin. I know someone who worked for a very senior Tory at the last election and was invited to work on one aspect of the tax proposals: flat tax. He declined because he rightly viewed it as a "total waste of time".

[Stuart Raven]

White flag. Love it. Shows we real Tories are all on really on the same side leaving a few wets cowering under the white flag.

But Forsyth and Leigh were fantastic on R4 lunchtime. Osborne wasn't.

Jack Stone's comments are soooh predictable. I suspect he is a sock puppet being used by some right-winger to discredit Cameron.

[Daniel Vince-Archer]

"What is the point of appointing these commissions if their results are so quickly disowned?"

The commission was established under the leadership of Michael Howard, not David Cameron.

In any case, George Osborne is the Shadow Chancellor and therefore responsible for shaping Conservative economic policy, not the unelected, unaccountable Lord Forsyth.

The findings of any policy commission are not binding thankfully, they are an advisory framework for future Conservative policy.

As I said yesterday, David Cameron made it perfectly clear during the leadership election that economic stability would be prioritised over unfunded tax cuts, and was subsequently elected by a significant majority of the party membership, so anybody getting their knickers in a twist about him sticking by that policy (the title of this thread is clearly wrong) now is being unreasonable.

[Jon Gale]

Osborne set up the Commission during the leadership race period. Howard was technically leader but it had nothing really to do with him.

I didn't hear WatO, but I saw Osborne on BBC Breakfast this morning "No unfunded tax cuts" leaves room for funded tax cuts (as many have pointed out since that word crept in weeks ago), and he only said some would be offset by green taxes.

The commission report is a menu of ideas. Osborne will pick some and leave others. Everyone is getting too excited over this.

Talking of an ideological victory for the left is sheer hyperbole.

[Michael McGowan]

Daniel, how you have changed your tune since the leadership election! Didn't you run some StopCameronAt All Costs blog? Tacking to the prevailing wind are we?

I didn't vote in the Tory leadership election because thankfully I am no longer a member. I get to vote at the next election. Perhaps you could explain to me why I should prefer Dave to Gordon, who has almost identical economic policies and is at least the devil I know?

[John Hustings]

Seems like Cameron and Obsorne get their assessment of public opinion through the columns of Polly Toynbee and nowhere else.

[John Hustings]

"Talking of an ideological victory for the left is sheer hyperbole. "

Actually, given Cameron's surrender on virtually every issue of any import, it's an understatement.

[NigelC]

I am struggling to understand the angst here. Isn't Osbourne simply saying we need a business plan? If we can explain how the tax rate cuts will be funded through elimination of waste, higher public service productivity etc and it sounds credible we can talk about our intention to cut tax rates over the course of a parliament.
What we cannot do is argue macro economic principles and models with the average voter.

[malcolm]

Michael,you never take my advice!!
Not sure I agree with you DVA.To dismiss the work of the Tax Commission after one day (if that is what George Osborne has really done)would show that the work of these policy groups are entirely irrelevant to the thinking of the leadership and are therefore a bit of a waste of everyones time.
It does seem strange 'though to come out with detailed tax proposals before coming out with some idea of spending plans.
Surely the two should be discussed in tandem?

[Prudence]

Everyone knows that "funded tax cut" means "a tax cut we think won't be savaged by The Guardian".

[Daniel Vince-Archer]

"Daniel, how you have changed your tune since the leadership election! Didn't you run some StopCameronAt All Costs blog? Tacking to the prevailing wind are we?"

I had a short spell as editor of the Conservatives Against NewLabourisation blog but I renounced the seriously misjudged views I expressed during the leadership election shortly after David Cameron was elected, as I broadly approve the policy direction that the Conservatives are taking under his leadership. I've not been an uncritical supporter since then, but I do feel that, on balance, he's doing a very good job.

[The Orator]

I was going to comment earlier on the Commission's findings but I did not see any point. This announcement confirms my instinct that there really is nothing we can do. The leadership's mind is made up and that was made perfectly clear at the conference.

The tax battle is just a metaphor for the bigger battle between right and left in the party and DC cant back down now without looking like he's lost control the party and his change agenda. Hanging on is the only thing that makes him look like a leader, and he cant let go of that. His policies all make him look like a follower.

DC has set out his stall and he's gonna take a left-wing conservative party to the next election. Everyone knew Cameron was on the left when he was elected. A leopard cant change it's spots. As party members we've made our bed and we should lie in it ... or get into bed with someone else.

[Sean Fear]

I agree, Orator. It was quite clear to me that when the party elected David Cameron in December, it was choosing its most left-wing leader since Macmillan (which is why I didn't vote for him).

Almost everything he has done since he was elected has demonstrated that my belief was correct.

[John Bull]

It's not rocket science - sweeping tax cuts for the most well-off help stimulate the economy, thus ultimately benefitting the nation as a whole, while encouraging entrepreneurship and shoring up a whole generation of committed Conservative voters. If a by-product of this are wholesale cutbacks in the welfare so-called "state" that's a happy coincidence.

My evidence for this? Only four election victories on the trot.

[RobD]

Green taxation is only one way in which a future Tory government could fund tax cuts, cutting government waste has the potential to fund a good few billion pounds of further tax cuts. The change in policy has been the concept of funded/unfunded tax cuts and should be welcomed as a significant compromise by the leadership.

No matter how much we believe in tax cuts the public simply doesn't seem willing to accept that tax cuts can equal a strong NHS and education system. I do agree with some that one way to tackle this would be to set about educating the public in a far more intelligent way than we tried at the last election, but it would be a hard battle as Ed Balls' hysterical populist rants yesterday proved. The other way of winning this battle is to make it clear, as the leadership have, that we agree with the principal of lower taxation and will work towards that aim while not promising specific unfunded cuts which could be used by our opponents to make us look like yesteryear's failures. The second option allows us to concentrate on other important areas which we have not concentrated on in the past and about which we need to change the public's opinion.

At the end of the day the public will always know that we are a low taxation party, we now need to convince them that we are serious about other areas which are wrongly not seen as right wing issues - the environment, social justice and others.

[Andrew Woodman]

What's happened to the findings of the James Review. Is that just being disregarded so we keep things like the New Deal?

[deborah]

UNFUNDED tax cuts. What's the problem?

Surely this covers both options.
The message is: Conservatives would like to cut taxes and can see ways of doing it but will not do so if it damages the NHS etc because their leader won't agree.
That's a message the general public can understand.
A few weeks ago everybody was fretting that Gordon Brown would bring in tax cuts and outflank us. Where does he go now?

[Og]

Who would have thought, a year ago, that the most likely schism in the Conservative Party would be over tax policy?

And that it would be that nice man, Cameron, who created this schism out of nothing?

And that, apart from stubbornness (and vanity?), there was no reason to have got himself into such a fix, that he would have been comfortable ahead (even further ahead?) in the polls anyway?

And that the Conservative Party would find itself being sued by its members under the Trades Description Act?

[ratbag]

The handling of the "Tax-cuts" was abysmal - as usual.
Firstly Forsyth should have made his proposals "subject to the financial situation at the time. These are ideal proposals and may not be immediately feasible"
Secondly - Cameron should not have retreated behind his defeatist mantra of "sharing" the proceeds of growth. he has to get it into his head that without taxcuts there will be no growth. As for "sharing" the proceeds it is clear that members want a HALT called to further growth in expenditure prior to cutting back when savings have been made.

Since G.Brown will leave some poisoned legacy behind him cuts may NOT be immediately possible but the TARGET must be there. Otherwise the core Tory vote as many here have warned and as I have seen, will sit on its hands or vote UKIP or BNP

Roger Helmer MEP in his current newsletter reports - - -
*****
Canvassing in Quorn

On Saturday morning Sept 30th I was out in Quorn and Loughborough canvassing for our by-election candidate James Poland. He fought a good campaign, but in the end we came third after Labour and the BNP.

There is a message here. I fully support the Party's efforts to reach out to the middle ground, without whom we will never form a government.
But we also need to reassure our core voters who still care about tax and immigration and crime and Europe. If not, we risk seeing them migrate to minor parties. In particular UKIP has adopted a strategy of offering these very policies. We must not let them steal our clothes.
*****
NB results were :- Lab 643 (38.7;-17.0), BNP 478 (28.8;+28.8), Con 386 (23.2;-21.1), Lib Dem 155 (9.3;+9.3) This means Labour LOST 131 votes, Tories LOST 103 votes, LD gained 13 votes and the BNP- - well you work it out. The government's unpopular and many Tories trust Cameron even less so won't vote Tory

[michael mcgough]

The way this is going they'll be recommending we join the Euro soonest.

[Robert McIlveen]

"no unfunded tax cuts" surely leaves room for funded ones... which means that after a tight early couple of budgets and public sector reform we can bascially reward the electorate for their faith by cutting taxes later in a parliament. A classic economic and political cycle (a la Geoffrey Howe in 1982) easily fits the criteria of having no unfunded cuts, if we assume that waste will be slashed.

[michael mcgough]

"if we assume that waste will be slashed"
we cannot assume that

[deborah]

I've just listened to the World at One.
http://www.bbc.co.uk/radio4/news/wato/
Lord Forsyth (20min in) explains the need for tax cuts, explains how it fits with Osborne's position and invites Gordon Brown to get on with it.
This is the debate that taxcutters have been calling for!
I wonder if some of the posters above have actually listened to the coverage we are getting.

[Michael McGowan]

Daniel says: "I renounced the seriously misjudged views I expressed during the leadership election." Do you now carry a Little Red Book with the Thoughts of Dave in it? This statement is incredible: Cameron campaigned as a left-leaning statist patrician and is now leading as such. He has been a model of consistency ....even if you believe, like me, that a modern democracy has outgrown this kind of leadership.

The difference between "unfunded" and "funded" tax cuts is another distinction without a difference, designed to muddy the waters and close down debate At best, a "funded" tax cut is one approved by the Guardian and the BBC i.e. zero.

[sbjme19]

The BBC and the whole left-wing media are only interested in this tax review document because they think it means "tory splits,tory schisms" which makes the story more exciting.
I think Cameron and Osborne should stick to their line. At present the promise of tax cuts simply does not win over/puts off the voters the party needs to win over.

[Adrian Owens]

Editor,

I usually agree with you, but I think you're being a little harsh on George Osborne.

George Osborne has talked about the supply-side effect of tax reductions. He has stated that he does not want to rely on these to produce a costed budget. This is prudent.

I have to set a budget at local council level every year. When we cut car park charges I was convinced we'd bring in extra income, but prudently didn't count my chickens. The resulting increase in car parking meant I was able to factor in £60,000 of additional income for the following year.

As long as Osborne comes forward with big tax reductions funded by small % cuts in the amount of government waste, I'll be happy.

I think that is still perfectly possible.

[Mike Christie]

"Firstly Forsyth should have made his proposals "subject to the financial situation at the time. These are ideal proposals and may not be immediately feasible"

I thought I heard Forsyth saying that these were a package of measures to be brought in over the life of a parliament as the growth made it possible to do so without hitting revenue. These cuts are not intended to be a 'big bang' first budget set of proposals.

[RobD]

Mike - that is exactly what Forsyth is saying and what the leadership are agreeing with, unfortunately that isn't the best media angle so it is getting buried.
Unfortunately our usually excellent editor and numerous bloggers on here seem to have missed this as well.

[TomTom]

I don't know which is less prudent - Tax Cuts or PFI.

PFI is certainly a stupid policy storing up future tax increases when the 10 Year Put Option is exercised by the banks on public assets

[Mike Christie]

Adrian@16:12 Damn fine point. I think it was Osborne who talked about wanting to over-deliver rather than over-promise at conference.

I'd rather we were cautious now talking about modest changes to tax, simplification and re-balancing rather than scary cuts which Labour translate into '1500 sacked nurses, 1200 sacked teachers and 65 grannies mugged for their pension', made our changes to the public services and cut waste etc. then took all that lovelyt saved cash in time for tax cuts before the 2013 election!

All Osborne is saying is let's save the money first, then make the tax cuts rather than make the tax cuts in the assumption we'll make the savings. Lets not spend what we haven't got yet.

[TaxCutter]

As mentioned by Michael Forsyth this morning, the Tax Reform Commission's Report is the most detailed and thorougly researched review of the UK tax system ever undertaken by an Opposition party. It is well-written, well-presented and well worth a read.

[Geoff]

Tim - this is barmy.

We are not talking about a 'concession to the left' but a concession to sensible economics.

We have an all-time low savings rate and you want deficit-financed economics?

Terrifying.

[George Hinton]

It's a start.
Clearly the messages on the BBC website are sending a message that cannot be ignored.
But, Ed Balls of NuLab has already started the counter propaganda line, spinning that the tax cuts will lead to massive cutbacks in the public sector.
This was predictable and one of the reasons why Cameron did not want to make a policy of tax reform or cuts, it provided ammunition to NuLab. In saying that though, by giving the hope of cuts, a vast swathe of the public are now thinking of change and a landslide of opinion is shifting towards the tories.

[Adrian Owens]

Mike

Thanks for the compliment. Glad to see Lancastrians agreeing.

What you say is fine up to a point, but I want to underline my point that with the huge scale of Government waste we should be able to present a menu to people in our manifesto. This would say that we will scrap this quango, eliminate this process or function etc etc and then specific how we will use the money saved to fund our tax proposals.

Our manifesto must not be vague and woolly but specific and costed. In that way Labour will not be able to say that we will be axing nurses, teachers etc Ad nauseam we can simply point people to our costed proposals in the manifesto. No sacked teachers or nurses - Labour' criticisms won't wash.

We would get some howls from quangos that we proposed to cut e.g Lord Kinnock if my savings at the British Council were implemented, but these wouldn't carry much weight with the public.

There'll be so much waste after 12 years of Labour government that we can fund significant tax relief.

Then when supply side effects kick in we'll be able to afford yet further tax relief setting in train a virtuous spiral.

Tax cuts work. We've cut council tax in real terms in West Lancashire over the past 4 years and seen our majority increase accordingly.

[Graham D'Amiral]

I'm a little confused by this article, George Osborne saying we won't be offering any unfunded tax cuts isn't a sudden change in policy it is exactly what he and David Cameron have been saying for ages. All that has happened today is that a report has been published setting out a range of options for us to consider.

[tax cut tory]

As insulation against any more dishonesty from Maude and Osborne in this debate--both have inaccurately claimed that Mrs. Thatcher never promised to cut taxes before elections.

The 1979 Manifesto:

"Cutting Income Tax: We shall cut income tax at all levels to reward hard work, responsibility and success."

"It is especially important to cut the absurdly high marginal rates of tax both at the bottom and top of the income scale."

"The top rate of income tax should be cut to the European average and the higher tax bands widened."

The 1983 Manifesto:

"Further improvements in allowances and lower rates of income tax remain a high priority."

The 1987 Manifesto:

"In the next Parliament: We aim to reduce the burden of taxation. In particular, we will cut income tax still further and reduce the basic rate to 25p in the £ as soon as we prudently can."