Lord Forsyth, the man George Osborne appointed to run his Tax Commission in 2005, has backed ConservativeHome's campaign for tighter control of public spending. Speaking to the IEA today Lord Forsyth, Former Scottish Secretary, has said that a slower rate of spending growth - 1.5%pa - would mean that all of his tax relief recommendations could be implemented over the course of a Parliament:
"Matching Labour’s plans to increase spending by 2.1 per cent a year in real terms for the next three years was a mistake, but one which the Conservative Party is unlikely to have to implement as the Prime Minister will almost certainly go to the wire before calling a General Election. Far more important is whether any subsequent pledges to match the Government’s spending plans are made – if they are, they tie the Party into spending promises that could mean higher taxes or higher borrowing in a downturn. It is not enough to pledge that things will improve over the course of an economic cycle. If the next economic cycle lasts ten years like the last one, that is far too long to wait for the tax competitiveness that Britain’s economy so urgently needs. The Institute of Directors has in previous Budget submissions called for total public spending to be increased by 1.5 per cent a year in real terms. That would seem like a much more sensible target to aim for. It would be sufficient to allow all the Tax Reform Commission proposals to be implemented over a parliament, which on a static basis would have reduced tax revenue by £21 billion."
Download the full text of Lord Forsyth's IEA speech.
6.15pm: Iain Martin at Three Line Whip has also welcomed Lord Forsyth's intervention.
Is it possible to achieve this restraint without cutting into essential services while simultaneously maintaining our commitments to public sector pensions and defence?
Posted by: Mark Fulford | February 26, 2008 at 16:29
That's a fairy step in the right direction. Given that as much as 15% or 20% of government spending is waste, pure and simple (quangocracies and pointless initiatives etc), I think an annual reduction of 1.5% is more like it, but hey...
Posted by: Mark Wadsworth | February 26, 2008 at 16:31
Congratulations ConservativeHome. Congratulations Michael Forsyth. Congratulations Michael Fallon. I think you are going to win this one in the end.
Posted by: Alan S | February 26, 2008 at 16:41
We have the small matter of winning an election first. Brown is going to get a very hard time from public servants keeping spending increases at 2.1% (half what they've been) reducing it still further will, to put it mildly, be politically difficult.
Mark Wadsworth, what percentage of the electorate do you really think will believe that we can make huge savings through eliminating waste? 5%? less? Politicians have a huge credibility problem. What we need to do is get elected and then 'show' the electorate that we can manage the public sector far better than Labour.
Posted by: Malcolm Dunn | February 26, 2008 at 16:59
"..15% or 20% of government spending is waste, pure and simple (quangocracies and pointless initiatives etc)"
Good to see you back, Mark, in good fighting form.
I agree with you: let us spell out to the electorate just a few of the savings we could make in government to demonstrate how we have been overpaying in taxes under Brown:
"more produce for our pound!"
Posted by: David Belchamber | February 26, 2008 at 18:06
Eh? the basic rate of income tax is already 20p isn't it?
Posted by: Comstock | February 26, 2008 at 18:08
Does Lord Forsyth want the party to lose the election. Talk of tax cuts or spending reductions will do just that. Lord Forsyth and others seem to have learnt nothing from the last three general election defeats.
Posted by: Jack Stone | February 26, 2008 at 18:47
Rather than talking about reducing spending, we should describe it as "rebalancing". If/when our opponents accuse us of proposing cuts, we should reply by saying something along the lines of But do we really need armies of 'real nappy outreach workers' or hundreds of 'smoking cessation coordinators'? Do we really need all your local council/NHS Trust's posters and leaflets to be translated into 75 different languages?.
With time, we can bring taxpayers [and voters] round to the idea that there is indeed a vast bureaucratic deadweight that needs to be trimmed.
Posted by: Tanuki | February 26, 2008 at 19:12
Here we go again, Same old refrain. it's just a cop out. No one quoted Osbourne re death duties this time but the point there is that Osbourne specified a tax; if he had prattled on about 1.5% government spending Balls would have had a field day. If you want to cut taxes specify the tax, give reasons and then talk of specific cuts in spending or other increases in tax. However, since no "tax cutter" ever bothers to get specific might I suggest a general approach, i.e. John Redwood's point about increases in spending and decreases in tax during the 18 years which demonstrates the point. I suspect no "tax cutter" would make the point though, they don't seem interested in persuading voters, just sounding off to fellow Conservatives who are too polite to call them what they are.
Posted by: David Sergeant | February 26, 2008 at 19:17
Good post David Sergeant
Posted by: Malcolm Dunn | February 26, 2008 at 21:01
The English is so poor in David Sergeant's comment I have no idea what he is saying.
Posted by: Umbrella man | February 26, 2008 at 21:14
" they tie the Party into spending promises that could mean higher taxes or higher borrowing in a downturn. "
We need to cut spending in case we have HIGHER BORROWING IN A DOWNTURN?
Lord Forsyth is an economic illiterate.
Posted by: Mike Ainsley | February 26, 2008 at 22:35
Totally agree with your comments David Sargeant. Why do some in the party still insist on putting forward figures which leave the Labour spin machine to fill in the blanks.
"What we need to do is get elected and then 'show' the electorate that we can manage the public sector far better than Labour."
Also agree with Malcolm's point about our credibility when it comes to funding our public services adequately.
Trust in our politicians and their promises is at an all time low, can we just take one step at a time and prove ourselves competent to manage the whole government machine in such a way that makes it more efficient and cost effective before we start throwing around promises that we might not be in a position to keep.
Posted by: ChrisD | February 26, 2008 at 23:19
Mike Ainsley@2235
Why do you say that Lord Forsyth is an economic illiterate?
The point that you seem to find difficult to grasp in your post is that in an economic downturn, tax receipts (ie Govt income) fall. So if you do not reduce spending, then either taxes or borrowing must go up to cover your spending commitments.
There is nothing economically illiterate about pointing that out.
Posted by: James | February 27, 2008 at 07:49
Mark Fulford asks:
"Is it possible to achieve this restraint without cutting into essential services while simultaneously maintaining our commitments to public sector pensions and defence?"
We could make a start by avoiding further unfunded commitments to pay for public sector pensions. My suggestion is that actuaries should be appointed to work out what the effective employer (i.e. taxpayer) contribution is to these pensions, were they run on a private sector money purchase (i.e. funded) basis. The private sector typical employer contribution is 6% of salary, so if the effective public sector employer contribution is 16%, then this extra 10% of salary could be taken into account when setting wage levels (bearing in mind that public sector pay is already, on average higher than public sector pay).
I'd also question how much is needed for "essential public services". Australia seems to supply generally similar "essential public services" whilst taking around 35% of national income, whereas here we take around 45%. We spend billions on quangos and much of their spending is hardly on essentials. To pick a couple of examples out of the air, what about the Arts Council and British Council? Nobody NEEDS what they do. They are not essential services. Close these and we'd save a billion just like that. Give me an hour or two and I could find £10bn of non-essential services that could be cut. Goodness knows what could be done if the government put its mind to it.
Posted by: HJ | February 27, 2008 at 17:55