Four economists review the TRC report

The Institute of Economic Affairs has asked four well-known economists for their verdict on Lord Forsyth's Tax Reform Commission. The TRC was set up by George Osborne and it reported last October, but he hasn't adopted its recommendations as party policy yet (unlike Gordon Brown!).

David Smith and Eugen Mihaita: "Nowadays it comes as a pleasant shock to read a serious, economically literate, analysis from a group associated with a British political party. Unfortunately, the semi-detached nature of the Conservatives’ Tax Reform Commission (TRC) means that it may have lost in political relevance what it has gained in objectivity and analytical quality."

Tim Congdon (UKIP supporter): "The Conservatives’ Tax Reform Commission was trapped in the assumptions of the late twentieth century. In the twenty-first century, Britain, like other European nations, will have to compete with nations – many of them in Asia – with much lower tax burdens. The Commission’s report was a missed opportunity. Mr Cameron’s rejection even of the modest £21 billion tax reduction it proposed reinforces the message that today’s Conservatives have lost the intellectual momentum given them by Lady Thatcher in the 1980s."

Patrick Minford: "In rebranding the Conservative Party, David Cameron has emphasised his commitments to public spending and a desire for tax cuts to pay for themselves in direct revenue cost terms. This is, of course, an absurd  position since, as the Commission points out, there will be substantial dynamic benefits from tax cuts: rising revenues as a result of higher growth, increased labour supply, reduced emigration and less tax evasion. Thus the Commission found the ground cut from under its feet before it could get its views out."

The above quotes are their concluding views of the TRC overall, click here to read in full what they thought about some of the specific recommendations.

Deputy Editor

Comments

[William Norton]

These comments simply underline what an excellent piece of work the Tax Reform Commission produced, and that the Party's response to it was disappointing.

Before the usual contributors head off down the cul de sac of 'tax cuts didn't work in 97/01/05' vs 'tax cuts worked for Maggie', consider this: it hardly improves our position if, avoiding the Labour lie that tax cuts = service cuts, we end up with a position which appears (incorrectly) to say 'taxes are too high but we aren't going to cut them', which would satisfy neither target middleground voters nor core voters.

A line which would pick up both groups would be: we can deliver the same or better services for less tax. But to get ourselves into that space, and avoid the risk which George Osborne has rightly highlighted of destabilising tax cuts (which would occur if tax cuts took place without serious curbs on runaway expenditure), we would need:
(a) well-worked out reform plans for the public sector;
(b) a convincing model for future spending requirements;
(c) a better way of selling tax cuts than we tried in 97/01/05.

What the leadership should be doing first, instead of thinking about tax cuts, or more likely getting bogged down with internal arguments about why we won't make that commitment, is establishing a Public Expenditure Reform Commission.

[Ay up]

What a waste of effort the TRC was, as this site pointed out even Brown dares to pick up some of its recommendations so what does that say about Letwin & co?!

[HF]

Not a very balanced group with at least 2 critics of DC.

[Graeme Archer]

All they need do is get 360 of their fellow economists to join them in writing a letter to the Times slagging off Cameron, and we're home.

A UKIP supporter writes: If the Conservative party doesn't promise now to reduce income tax to zero and cut government spending by 50% per year, it has no chance of winning the huge majority it needs in parliament to do nothing, because all laws are made in Europe anyway, erm, so it doesn't matter what UK tax policy is, erm, which is why I'm so angry about this one, ah, do you remember me? I was famous, now I'm a big fish, erm...

[TFA Tory]

Which UKIP supporter, Graeme?

Are you looking forward to higher air fare taxes and not being able to take a flight to Amsterdam, Brussels or Paris? That is what Cameron, Goldsmith and Gummer are proposing.

[Graeme Archer]

Hi TFA. I was being cheeky about Tim Congdon, ineffectively of course.

In response to your Q, I don't have an automatic negative response to the notion of deliberately increasing the expense of flying (or car driving). The streets where I live are too crowded. This means there are too many cars on them. This means that we either put up with the congestion, or we ban some cars at random, or we use a price mechanism to reduce the congestion. I favour the latter. I was at a candidate selection meeting the other day, and this bloke (who remained unselected) made a throwaway comment, along the lines of "We're all car drivers here aren't we? Get rid of the congestion charge". Now, I think we should get rid of it too (though not for the same reasons as the not-candidate). But his casual assumption that everyone was a driver (and that everyone thinks driving is a good thing) made me reflect and I had a look about me: Cllr C on my right -- no car, cyclist. Myself and Mr K on my left - no car, by choice. In front of us - Candidate B - mainly a cyclist, though a one-car household. Mrs M and Mr C, no car. More people don't drive and dislike cars than policy makers seem to assume, though I admit we're a teeny tiny minority.

On Sunday we went to Stansted airport for a couple of hours (great life eh!). It was awful. I have a memory of Stansted when it opened, all lovely and gleaming. Now it's a heaving mass of people. To cope with this, the owners of Stansted and Prescott (spit) want to build over one of the last beautiful bits of north Essex. I disagree with this. Yes, I am prioritising the preservation of beauty, unspoiled countryside and ancient communities over the "right" of everyone to have cheaper and cheaper (and therefore more and more) flights. I don't count the "right" to a £4.99 flight as one of those inalienable rights we should fight to preserve. I doubt I've ever written anything less popular on this website!

[malcolm]

Nope Graeme, it's popular with me at least. I still hope BAA lose with their Stansted expansion plans.

[David Sergeant]

Minford seems to be missing one of the fundementals of Britain to-day. Not only is our government up to its eyes in taxes it is also up to its eyes in debt. Hence, if you want to cut a tax you cannot calculate all those increased incomes he so clumsily burbles on about so in that year you have to show were the money for the cut is coming from. Unlike all the simpletons going on about Brown buying the TRC tax agenda, he was trying to "shoot a Tory fox" when he cut income tax, but, since he had no leaway on debt even he had to put up the taxes of the lower paid to pay for it. And, by the way, the TRC recognise that while lower tax stimulates economies government income never compensates for the lost revenue (even if you could calculate it in advance, which you can't).

I wonder where all the enthusiastic tax cutters where at the last three elections when people voted Labour because tax cuts mean services cuts? And the cutters only appear in order to atack the Conservatives when Cameron is expressing lack of enthusiasm? Just another demonstration of why right wingers are looked at with suspicion by voters.

[Robert Winterton]

David, most of us are still here, waiting in vain for the likes of yourself and the population at large, to use a well known expression, to wake up and smell the coffee before it is too late! Sadly, I think people are in for a bit of economic realism in the next year or so, which has been a long time coming and maybe then they will realise that we have given back alot of what we achieved thro' the 80s . But such is life! Your comment that 'while lower tax stimulates economies government income never compensates for the lost revenue' is simply wrong.There are numerous examples of the laffer curve effect.

[TaxCutter]

The key political concern is the fact that the TRC's report has largely been ignored by the Conservative party, when the recommendations it made have been widely supported and the quality of the report highly praised. The party still lacks a tax policy beyond the unconvincing "share the proceeds of growth" phrase Dave made up on the spot when campaigning for the leadership.

Most of the comments about the TRC made by the economists were favourable, especially in relation to the corporate tax elements. Tim Congdon made some good points about the high levels of state expenditure, but public expenditure was never in the TRC's remit.