Michael Forsyth warns that voters will be denied a choice at the next election if Tories match Labour on spending

Jonathan Isaby has two great stories in today's Telegraph: (1) Nick Clegg was a Tory at university and (2) Lord Forsyth's criticism of Tory tactics on the 10p tax band.

Lord Forsyth matters for a number of reasons - not least because George Osborne appointed him to chair his Tax Commission.

This is what the former Secretary of State for Scotland told The Telegraph:

"It would be mad to reinstate the 10p tax band.  What we should be doing is taking millions of low earners who are being hammered with extremely high marginal tax rates out of the tax system altogether.  That's why we proposed abolishing the 10p rate and raising the personal allowance to £7,185. That would mean two and a half million people being taken out of paying tax and is in keeping with the stated Conservative aim of making the tax system simpler and fairer. To retain something which adds complexity to the system would be daft. Rather than backing a Labour amendment to reinstate the 10p rate, the Conservatives ought to be tabling an amendment to raise the personal allowance."

ConHome's understanding is that the Tories are not necessarily in favour of restoring the 10p but oppose its abolition without something compensatory.  Lord Forsyth told us this morning that growing government spending more slowly than Labour plans to do - over the course of a parliament - would make changes to the allowance and some business-friendly tax measures affordable (also see here).  He told us:

"If the Conservative Party wants to demonstrate that it is on the side of hard-pressed taxpayers, it must reduce the overall burden of taxation. According to a recent YouGov poll 67 per cent of voters believe the government spends too much and taxes are too high. These hard-working people will not be offered a choice at the next election if we pledge to spend the same and tax the same as the Government."

It was notable that Philip Hammond, George Osborne's deputy, interviewed for the Week in Westminster on Sunday, emphasised that the commitment to match Labour's spending plans expired in 2010/2011.  We have long hoped that it won't be renewed then or only renewed for one year to blunt any attacks from Labour.  A first-term Conservative government will then have the freedom to bring public spending under control, reduce borrowing and introduce economy-boosting tax relief during the remainder of the parliament.

Labour MP Frank Field told ConservativeHome that the Commons clerks are unlikely to allow a motion that proposes an alternative to the 10p tax band.  The best motion will be one that comes from a Labour MP and requires the Government to bring forward a compensation package for those affected by the abolition of the 10p band.  He understood the arguments for raising the allowance but he favoured simultaneous clawbacks from higher earners so that it was genuinely lower-paid households who benefited. 

Comments

[David]

I see; so Lord Forsyth's view is that we should simply offer a different policy to Labour, regardless of whether we think it a good idea or not, whether it politically astute or not, simply to ensure a 'choice'. And here's me thinking the 'clear blue water at any cost' strategy had been discredited.

[Edward Huxley]

I don`t want to be unkind to my MP Philip Hammond (a nice chap and a good constituency MP), but he had three previous jobs in the shadow cabinet which didn`t last very long and now the poor chap is supposed to be a financial expert. As I am well into my 80s I definitely don`t want to be stuck with Labour`s taxation until 20/10/11.

What is the Tory party for? Sounds like Blue Labour again!

[Editor]

That's unfair David (1116).

Michael Forsyth isn't proposing a clear choice for the sake of it but so that poor people who are facing tax rises, mortgage rises and utility price rises know that one party is on their side.

[Jonathan Powell]

I was wondering when someone would point out to Cameron that the very sensible idea of abolishing Brown's pointless 10p band was first suggested by the Conservative Tax Commision, and represents the "flatter, simpler" tax policy that Osborne is supposed to believe in. Forsyth is quite right: the logical objection to abolishing the 10p rate was that the personal allowance wasn't raised to offset the effect on the poor. The Conservative campaign to reinstate the 10p rate has been nothing but opportunistic pandering.

In my view Forsyth's also right that the Tories should propose tax cuts, which could easily be afforded if the growth of public spending were restrained. This would be both politically popular and potentially good for the economy.

The only area I disagree with Forsyth is where he says that raising the personal allowance would "would mean two and a half million people being taken out of paying tax". The reality is everybody would still be paying tax in the form of VAT, council tax, duty on petrol and alcohol, as well as corporate and taxes which are inevitably passed on to workers and consumers (e.g., see http://gregmankiw.blogspot.com/2006/05/corporate-tax-rates.html).

[johnC]

I agree that the long term aim should be to raise personal allowances and take the low paid out of the tax system altogether, but I don't think this is inconsistent with opposing Labour's Robin-Hood-in-reverse abolition of the 10p tax band which is hitting the poorest paid now.

[Stewart Geddes]

The abolition of the 10p rate makes a lot of sense provided we replace that with a significant increase in the tax allowance. I have argued many times before that it is crazy that someone on the minimum wage and working full time should pay tax at all.

The problem with this proposal is that it carries Lord Forsyth's name. There are very few names in Scotland more toxic than his. As such a good idea is in danger of being ignored altogether. This is what happened at the last election. Great ideas were completely ignored once conservative names appeared....

[Sean Fear]

Reducing income tax and NIC paid by the poorest workers is a good thing. Removing them altogether is probably not, for if they don't pay such taxes at all, they have a vested interest in voting for parties that will push up public spending.

[Andrew Lilico]

The 10p band was a stupid scheme when it was introduced, it harmed the poor in the name of helping them, and it's a good thing it is going. We should be heralding its demise as yet another Gordon Brown u-turn, and urging that the money be spent on raising the personal allowance instead of cutting the basic rate of income tax (which is too low).

[Frederick James]

OT: is there any chance of a thread on Broon's bizarre attempt to blame us for his bargain gold sale fiasco? Does anyone know, is this an accurate quote:

"I'm sorry, on gold if I may say so the mistake was made by the previous government not to have a diversified portfolio and we had to diversify into gold... when people say the price of gold has risen the value of the Euro which of course we bought has risen."

WTF??? Has he come completely unhinged already? We may need to resurrect the Save Gordon campaign.

[David Sergeant]

Usual stuff, Labour on the ropes, Tories having to deal with one half of a half baked scheme and a "senior Tory" anxious to massage his ego pretends the political options available are more comprehensive and has a devious winge at the party to provide amunition for Labour. Happens all the time, back to the 80s. No doubt Gordon will be savouring a moment at the next PMQs.

Has it not occured that the reason we get called nasty is that people like Forsyth are supporters?

[Roger Helmer]

In broad terms Michael Forsyth is right. We should not defend the 10p band, which was only invented to give Labour a headline. We should be raising thresholds and taking the lower-paid out of tax altogether. But simply in House of Commons tactical terms, to make it clear that we oppose this Labour imposition on the poor, it makes perfectly good sense to support the reinstatement of the 10p band. It might not be part of a Tory strategy, but the government was wrong to remove it without also raising thresholds.

[Yet Another Anon]

We should be raising thresholds and taking the lower-paid out of tax altogether.
Unfortunately every single government since the 19th century has presided over a situation in which Income Tax thresholds have been allowed to apply ever lower down the scale.

Now and again Treasury ministers announce proudly that the Income Tax threshold is to rise in line with inflation, the rest of the time the threshold ends up frozen, and ministers of whatever hue have raised National Insurance, allowed National Insurance thresholds to be devalued and increasingly funded NHS funding out of what is supposed to be a fund for contributory benefits, what is funded out of NI contributions should be provided on the basis of contributory eligibility.

People are sceptical about claims of politicians promises on tax & spending because they have experience of politicians of various different policies in opposition saying one thing and in government doing another.