McCain's economic prescription puts George Osborne to shame

The Sun gives a thumbs up to an article by George Osborne in today's Sun; The Shadow Chancellor outlines how he'd stop the credit crisis.

George Osborne offers good ideas (all from Monday's speech) but ConservativeHome continues to be struck by the tortoise posture of our frontbench team (and all UK politicians) in comparison with the hare-like boldness of American politicians.

Republican nominee John McCain set out his own economic plans yesterday:

"The McCain campaign put the cost of his tax cuts at roughly $200 billion a year, but its estimate did not include the cost of making the Bush tax cuts permanent, which would more than double that figure.  The campaign said it would offset the lost $200 billion by eliminating from the federal budget earmarked pork-barrel projects; putting a one-year freeze on discretionary spending in most federal agencies, later eliminating wasteful programs; broadening the tax base by eliminating loopholes; and spurring economic growth."

If only we had a politician in Britain willing to offer a similar remedy to Britain's (greater) economic woes.

One of the sections in George Osborne's Sun piece verged on the misleading.  He wrote:

"Five million people earning less than £18,000 a year now face higher income tax bills because of Gordon Brown’s 10p tax con.  People are already struggling with higher petrol bills and higher food bills. Government should be on your side, not on your backs. So I would stop the tax rises on families."

But how would he "stop the tax rises on families"?  So long as we are following Labour's spending plans and are committed to pre-fund all tax cut pledges it is impossible for the party to stop them without raising other taxes. That promise from George Osborne is meaningless.

All of this amounts to a huge missed opportunity.  The Conservative Party has a open goal before it.  Labour has just increased taxes on some of the poorest households in the nation and we could promise to be their champion over the next few years by following Michael Forsyth's advice of yesterday and raising the income tax threshold by reducing the growth of public spending.  Taking millions of poorer Britons out of the tax system altogether is the nearest we have to Margaret Thatcher's sale of council house sales.  With a 9% lead in ConHome's Poll of Polls the Tory leadership probably thinks that its tortoise strategy is working and to a very large extent it is - because of Brown's implosion.  What it isn't doing, however, is creating enthusiasm amongst voters.  Nor is it building a new long-term electoral coalition for the Tories, as Margaret Thatcher did.

PlayPolitical video: McCain ad promises to unite US economy

Comments

[Jennifer Wells]

It's possible to argue that Tory caution is good politics but bad for the country.

[George Hinton]

McCain is politcking. He can say all that in the full knowledge that the Senate/Congress can and will block the most contentious items.

[Veritas]

ConHome is spot on here. Michael Fallon for Shadow Chancellor, immediately please.

[James Burdett]

I think it is somewhat disingenuous to compare a person who is six and a half months away from an election with someone who is 2 years away from an election. McCain can afford to be explicit and indeed would be expected to be explicit, Osborne can afford to be somewhat cagey on all the details as the situation could change utterly, and the politics of the moment would mean that anything he came up with would be either stolen or misrepresented.

[Parliamentary Insider]

But McCain's position is self-evidently ridiculous. It's been mocked to high heaven for not even being vaguely costed properly.

"Spurring economic growth"?

What a joke.

McCain was right when he opposed the nonsense of Bush's tax cuts and he is wrong now.

[Editor]

That's a reasonable point James but the issue of the 10p tax band is live now, however.

[James Burdett]

Editor - indeed the 10p is live now, in the same way as VAT on fuel was live in the 90's I cannot remember the then Labour opposition explaining fully how it would pay the cost of their opposing the imposition. They just opposed it, sowed havoc on government benches sat back and reaped the rewards.

[Parliamentary Insider]

See Clive Crook's superb analysis here:

http://clivecrook.theatlantic.com/archives/2008/04/the_fiscal_consequences_of_geo.php

[DavidRHayes]

I completely agree with James.

However I do see the Editor's point, Osborne could say that he would reintroduce the 10p rate, or even better a lower starting rate, with the removal of the bureaucratic Tax Credits system, which is only beneficial if you know how to play the system.

Those who are most deserving generally get the raw end of the deal.

[Yogi]

I would give Gideon the benefit of doubt. Every time we come out and say that if elected we would spend less, the Government spin machine springs into action - Tory cuts and destruction of public services.

Whenever we announce specific proposals, the government steals them (IHT).

Instead we should work out what we plan to offer the electorate and keep quiet until very close to the election.

However, Gideon also should continue to highlight the abolition of the 10p tax band and also keep on pin-pointing the total taxc take by this government year on year - all the stealth taxes, and its deceit in massaging the inflation and unemployment figures.

[Alan S]

George Osborne's point about unfunded tax cuts is such a lie.

The only reason there are no funds for tax cuts is because Osborne has promised that all the proceeds of growth will go to still more public spending.

If Osborne wasn't splurging on spending then tax cuts would be affordable.

[MrB]

I think Osborne, like most Conservatives, would love to cut taxes.

However, put yourself in his shoes. Would you risk the progress we've made by making tax cutting pledges, knowing full-well that a) Labour would immediately scream "CUTS TO SERVICES!" B)There is no past evidence that pledging such things will lead to a massive boost in support.

The labour "cuts to services" or "spending black hole" attack gets them an easy headline, and is difficult for us to rebut.

I would love to see us propose tax cuts but I also fully understand that it may be something we only get promised once we are in office.

[ChrisD]

"McCain's economic prescription puts George Osborne to shame"
Lovely headline, wonder if it will go the same way as others once the implications and details are put under close scrutiny....

"But McCain's position is self-evidently ridiculous. It's been mocked to high heaven for not even being vaguely costed properly."

That's the impression I have been getting, I will watch with interest the way that this policy announcement unfolds over the next 6 months in the American elections as it is picked over in detail.

[Sammy Finn]

What are you talking about ChrisD?

McCain has said that he'll pay for the tax cuts by "eliminating from the federal budget earmarked pork-barrel projects; putting a one-year freeze on discretionary spending in most federal agencies, later eliminating wasteful programs; broadening the tax base by eliminating loopholes; and spurring economic growth."

Do you know what that was once called?

Conservatism.

[Andrew Lilico]

Editor,

Do you believe that McCain's scheme would have any useful economic effect? Or is it the politics of the thing that concerns you? If the former, do you believe that there would be a similar positive economic effect in the UK? What if Osborne does not believe that? Isn't Osborne's claim that he'd *like* to be able to offer big tax cuts in this kind of situation - doling out the grain stored up in the seven years of plenty - but that because Brown has over-spent and over-borrowed, he just doesn't have any scope to do that? Don't you feel that that critique is working - getting through to both voters and commentators? How is that position compatible with proposing $50bn tax cuts (the approximate UK equivalent of the McCain scheme)?

If you are saying that a $50bn tax cut package would just be good politics, regardless of whether it would be a good idea economically, isn't there the considerable danger that economics editors would see through such a policy, and we'd get slated for playing politics with economic stability?

Of course, going out past 2011 we should indeed not be promising to match Labour's plans - as you so often urge. But that's a different matter from the policies offered now.

[Oscar Miller]

This is a case of being blinded by the right. The majority of people in the freefloating centre (or the left come to that) - where votes need to be won - do not have a problem with George Osborne's position. He is absolutely right to attack the abolition of the 10p tax rate. At the appropriate time - i.e. in a manifesto pledge just before the election, I hope he will put forward a properly costed policy of lifting the lowest paid out of income tax and a radical reform of the hugely inefficient and misguided tax credit system. But now is not the time to make such a proposal. His job now is to act as a principled opposition - and that's what he's doing.

[London Tory]

ConHome veers dangerously close to the Heffer/Daley brand of unelectable Toryism with these views.

When was the last time you heard Labour- given plenty of air space by a compliant BBC- talking about 'Tory cuts' and 'Tory black holes'?

We are 16% ahead in the polls. I would say the Cameron/Osborne strategy is working just fine.

[Letters From A Tory]

How can anyone know the precise scale of the financial mess that Labour will leave the Conservatives with in 2010? I'm right with Osborne on this one - the waiting game is definitely the best strategy.

[ChrisD]

Sammy Finn, what I am talking about is groundhog day!
Does this remind you of the promises made at election time under Hague or Howard?
In fact this is more dangerous for McCain because he is trying to sell this on the back of 8 years of Bush economics.
You should read Andrew Lilico's post!

[John Reeks]

"The campaign said it would offset the lost $200 billion by eliminating from the federal budget earmarked pork-barrel projects; putting a one-year freeze on discretionary spending in most federal agencies, later eliminating wasteful programs; broadening the tax base by eliminating loopholes; and spurring economic growth."

What does any of that actually MEAN?! It's all just a load of buzzwords that mean absolutely nothing and do not demonstrate where the money for tax cuts is actually going to come from! If you're going to promise tax cuts you can either say "we're going to cut X, Y and Z" or you can say (as Osborne does) "we're going to slow growth in public expenditure, cut waste, etc and then when the money is there, all saved up in a big pot and visible, use it to cut taxes" - In short, all of McCain's tax pledges are totally unfunded.

[Josephine]

Just because we are British Conservatives it does not mean we are slavish to an American Republican's politics.
Personally I agree with Osborne.
I fear you lot on here are far to willing to believe in the 'Simon Heffer' version of being a Conservative. You can all keep your heads up your backsides if you like, but Osborne and Cameron represent change, and change for the better as far as I am concerned. McCain may be an honorable & quite likeable man, but his politics is old and tired. For heavens sake grow up, look forward and get into supporting Cameron et-al. Of course if you want to stay in the 'Political Dark Ages' then stay the same, don't change, and start saying 'Give up Hope, all Who Live Here'.
I am banking on a Cameron/Osborne Gov't the next time around. I also hope America has the sense to go for Obama....
josephine - a free thinking liberal conservative.

[Editor]

Letters from a Tory: "How can anyone know the precise scale of the financial mess that Labour will leave the Conservatives with in 2010? I'm right with Osborne on this one - the waiting game is definitely the best strategy."

Your argument applies to spending increases too. Osborne is prepared to say he'll increase spending by 2.1% in 2010 but he says he won't commit on taxes. This, in reality, isn't debate about funded pledges or unfunded pledges but about priorities. Whether Conservatives think tax relief or still higher spending is what the economy needs.

Andrew Lilico: "If you are saying that a $50bn tax cut package would just be good politics, regardless of whether it would be a good idea economically, isn't there the considerable danger that economics editors would see through such a policy, and we'd get slated for playing politics with economic stability?"

I'm not proposing any particular tax cut package here Andrew although I've previously proposed a c£9bn tax relief programme over three years - paid for by reducing the growth of public spending to +1.5%pa compared with Labour's +2.1%. I think it's good economics and good politics. Relief to businesses would help the economy and targeted tax cuts on lower income households would be good politics. Economics editors could understand that!

[Umbrella man]

This thread is soooo revealing about Cameronism.

All those who defend Osborne's inaction do so on the basis of political calculation.

There is never any talk about what is good for the economy or what might help the poor bearing the brunt of Labour's taxes.

It disgusts me.

[David Cooper]

In marked contrast to the "tortoise posture" upon this specific issue, just take a look at the blog entry highlighted on the side of the home page, where John Redwood (yes, it's him again) produces yet another article showing up Brown's failings and concluding with a 7 point plan for economic recovery - a particularly clever one knowing that most if not all of the points would not only be popular but also politically unpalatable to the PM.

So why are the shadow Treasury team not writing in these terms rather than leaving it to an eminent outrider? Surely David Gauke, Mark Hoban and Justine Greening would dearly like to capture some publicity?

[Vincent Wall]

I'm with Tim and Sam on this one. Promising to take millions of low paid people out of tax makes tax cuts morally powerful and connects us with exactly the sort of "coping class voters" who elected Margaret Thatcher.

[Adam in London]

Editor, we have 3 year spending rounds in this country. Over the round spending is fixed (there are a couple of exceptions such as most of the DWP budget and the reserves for if we go to war). This gives government departments a fighting chance of being able to plan their spending effectively. You seem to think we ought to ditch that in order to be able to score some cheap headlines two years away from an election. Doesn't that strike you as rather shallow politics?

[Editor]

No, Adam.

Many households in this country are seeing their disposable incomes fall this year.

Restricting the public sector to 1.5% growth a year is perfectly reasonable and will force it to eliminate some of the government waste so powerfully documented by The TaxPayers' Alliance in their annual record of waste.

[EML]

I'm with Cameron and Osborne on this one. We can afford to be tortoise-like on the economy because we are two years away from an election.

What I would like to see, however, is increasing radicalism on things like crime, education and health over the next year.

[London Tory]

The Heffer Wing of the Tory Party need to wake up and smell the coffee. A David Cameron Tory Government would do far more for 'their people' than a Brown Government will in a million years.

[Adam in London]

Editor, so basically yes you do want to get rid of the three year spending rounds. Glad we could clear that up.

[Richard]

"You can all keep your heads up your backsides if you like, but Osborne and Cameron represent change, and change for the better as far as I am concerned."

I don't see how change for the better means that I don't get any assistance with paying off my mortgage (which I would do if taxes were cut).

As for those worried about spending cuts, the TPA has documented billions and billions wasted every year. Surely we could hack away at some of this?

[MrB]

I am actually bowled over with the considerable amount of people saying "Im with Osborne on this one". A single comment like that before october would've been swamped with ones to the contrary. Just shows how quickly things can change.

[London Tory]

@MrB

Its because we have finally wised up after 11 fruitless years in opposition, and are serious about winning next time.

Pledging uncosted tax cuts is electoral poison.

I still remember "Lord" Michael Forsyth's face on election night in 97 when he lost his seat.

[Editor]

London Tory: "Uncosted tax cuts is electoral poison"

That's a straw man.

We can have fully funded tax cuts and slower public spending growth.

[Jack Stone]

What McCain means is he will cut help to the poor through cutting state programmes.Like as happened in the past with Republican admininstarations tax cuts for the better off will be paid for by driving already poor people into greater poverty.
You also cannot compare America with this country as they do not have a National Health Service or the sort of comprehensive welfare programme that takes up so much of state funding.
McCain may become President but if he was running in this country he would lose because people are not prepared to back politicans who make selfishness a policy!

[Parliamentary Insider]

"This thread is soooo revealing about Cameronism.

All those who defend Osborne's inaction do so on the basis of political calculation.

There is never any talk about what is good for the economy or what might help the poor bearing the brunt of Labour's taxes.

It disgusts me.

Posted by: Umbrella man | April 16, 2008 at 12:57"

Rubbish.

The Editor is indulging in fantasy politics not because of the politics of it (which are daft) but because his is a prescription for horrifying inflationary pressure.

I just hope McCain is lying rather than stupid.

[Small government conservative]

If the Conservative Party cannot reduce the size of the state then it's hardly conservative in my view.

[Parliamentary Insider]

Also:

"Many households in this country are seeing their disposable incomes fall this year."

Is this true?

I thought post-tax income grew by about 3.6% this year?

[Andrew Lilico]

I would like to remark that I support the Editor on both the general issue of public expenditure control (though I would prefer us not to commit to anything to our committing to 1.5%, I certainly think committing to a reduced level is better than committing to Labour's plans) and on the issue of the 10p band (though I don't think we could propose the thresholds rise he wants without also proposing to reverse the Basic Rate Cut that was funded by the 10p band abolition).

The 10p band, in particular, was a stupid idea that was introduced by Gordon Brown himself against all reason and against the interests of the poor, and we should be lauding its abolition as another Gordon Brown u-turn (The Gentleman that *is* for Turning) not opposing it in unholy alliance with confused Labour left-wingers.

[Andrew Lilico]

Parliamentary Insider,

But of course RPI inflation has been consistently higher than 3.6%, so in real terms there has been a cut...

[James Burdett]

Andrew Lilico - Whilst we can soberly sit here and understand the effects of the 10p band and the case for supporting the abolition thereof. I can imagine the handwringing of La Toynbee et al as they hit us for cheering on a measure that 'hammers' the poor. I would imagine that Brown would then perform a U-Turn and leave us high dry and friendless. Sometimes the political imperative and the economic one diverges and we need to concentrate on the former until we are in a position to concentrate on the latter.

[Richard]

"The Editor is indulging in fantasy politics not because of the politics of it (which are daft) but because his is a prescription for horrifying inflationary pressure."

How does cutting taxes increase inflation?

[Jennifer Wells]

""Many households in this country are seeing their disposable incomes fall this year."

Is this true?

I thought post-tax income grew by about 3.6% this year?"

Parliamentary Insider reveals how out of touch he/she is.

[Robert Thompson]

I don't see what the Editor is harping on about. As far as I am aware, Osborne has not committed the party to following Labour's spending plans past 2011 and has not ruled out tax cuts. I have little doubt that we will go into the next election offering some sort of tax cut but you can't expect Osborne to second guess the state of the public finances in two years time.

To demand full details of tax and spending plans two years before an election is frankly moronic.

[question mark]

Why is Osborne the "Shadow Chancellor"?

What are his qualifications for the job?

[London Tory]

#We can have fully funded tax cuts and slower public spending growth- Editor #

But not until we are in Government. Not sure when you were last out canvassing, but this would play straight into Labour's hands, just when we should be dancing on their electoral corpse.

Stick to the strategy that has put us 16% in front in the polls.

[Parliamentary Insider]

"Parliamentary Insider reveals how out of touch he/she is."

For demanding statistics? Only in the Tory Party is asking for proof of anything considered a fault.

[Parliamentary Insider]

"How does cutting taxes increase inflation?"

Unfunded tax cuts increase inflation. There's little mystery to it.

[Matthew]

This is a good debate - I am wish the 'hares' in principle and the 'tortoises' in practice. We don't know what is coming economically. What we do know is that we are not going to be in power by the time it is (probably) salvaged to some extent. Does anyone remember the Labour economic policy from the Major years? No, they just remember the disaster. It is fine, like GO has gone, to announce measures but to suggest that he needs to go as far as McCain (assuming for a moment his policy is good) is potentially political suicide if it all fixes itself (as markets are prone to do) and we are left looking silly. The Editor is entitled to his views but unlike the rest of us who have two motives - the good of the country and the good of the party - the Editor has another - the need to stay influential (which he undoubtedly is). This means being radical from time to time!

[Jack Stone]

The Edito is influential. Funniest thing I have heard in ages. People listen to him yes.People take notice of him no!The former is easy the later is that much harder and I am afraid the idiotic views of the editior are only ever likely to be taken notice of by people without influence.

[David Belchamber]

"Taking millions of poorer Britons out of the tax system altogether is the nearest we have to Margaret Thatcher's sale of council house sales".

Yes, that is politically - and morally - the right thing to do.

There will be offsets from the benefits saved but we should also build on the usual tory mantra "we will share the proceeds of growth" by adding the all-important words "and the reductions in government waste".

We cannot know until we see the books just how bad the economic situation but, as the Editor suggests, we should scale down our promises about increases in state spending to below the predicted rate of growth.

[David Sergeant]

Sorry, I have to say I'm disappointed by the editor putting this the way he has. To imply that McCain's political situation is the same as Osborne's is unfair. Also, the way the American constution works most of McCain's "savings" are, at best, doubtful and at worst pure myth.

I apreciate you are playing devils advocate but there is a need to keep feet on the ground.

[Richard]

"Unfunded tax cuts increase inflation. There's little mystery to it."

I'd say it's not the tax cuts but the borrowing that increases inflation. But I see what you're getting at.

Meanwhile I see Jack Stone is trolling again. For newcomers to the forum, he first popped up a couple of years or so ago pretending to be an over the top Cameron supporter designed to wind up "traditionalists". Someone traced the culprit to the UKIP forums under a post "Attack the Tories in their own forum" or words to that effect, admitting he had set up a Cameron "bootlicking" persona. Unfortunately the post no longer exists. I'm not going to emtnion the UKIP poster's name because I recall he had a reputation for suing people.

[RobD]

This thread is soooo revealing about Cameronism.

All those who defend Osborne's inaction do so on the basis of political calculation.

There is never any talk about what is good for the economy or what might help the poor bearing the brunt of Labour's taxes.

It disgusts me.

Posted by: Umbrella man | April 16, 2008 at 12:57

Political calculation IS important though. What is the point in continually fighting for unfunded tax cuts when the evidence is that people will not vote for that? Surely it is better that we offer slow, funded tax cuts and a reduction in the size of the state over a whole term and get elected rather than we offer large tax cuts, get painted as evil service cutters by Labour and lose?

Yes I'd love large tax cuts but surely it is better to get a steady reduction in taxes over a while term than to let Brown back in to continue his stealth tax rises.

As for McCain teaching George a lesson - as much as some people would prefer it to be otherwise we are a very different country than the US, with a very different electorate. What works in Houston does not always work in Hull. Can anyone imagine the suggestion that the way to react to a highshcool shooting is to give more students guns gettng a hearing in this country? Thankfully here that suggestion would be treated as the dangerous joke that it is, in the US there is a strong and infuential group of the electorate who support it.

[Editor]

My feet are on the ground David!

I have very specifically said that we should take hundreds of thousands out of tax by slowing the growth of spending. All fully-paid for but it simply changes the priority from ever high spending to giving some help to poorer families.

You can disagree with this but it's not 'feet off the ground'!

:-)

[Malcolm Dunn]

If the USA goes into recession I suspect it will be extremely difficult for any President to cut spending on anything like the scale McCain suggests. I would be interested to see if he spells out which programmes will be cut during the election campaign.

[Chad Noble]

We're talking about George Osborne, aren't we?

The man who got up at conference and pledged to raise 3.5 billion pounds a year from non-doms?

Is he still claiming this or has a quiet backtrack occurred? If he has backtracked, how is he going to 'offset' his IHT cut?

Or does he now support unfunded tax cuts?

[Raj]

To be fair to Osborne, the US probably has a lot more scope for cutting spending. Plus Americans like tax cuts if they benefit (i.e. not just the rich), whereas there is less automatic praise for them as people have got into the habit of thinking they can have spending or tax cuts - not both.

[David Sergeant]

"I have very specifically said that we should take hundreds of thousands out of tax by slowing the growth of spending"

It pains me editor to disagree. Osborne is in no position 2 years from an election to specify any rate of growth in spending. If he did, since public services have plans laid over three years, Labour would be in a position to produce seemingly specific cuts in public services - huge numbers of nurses will be the first statistic about cuts. The point made by several people is that if you are the oposition any attempt at financial specifics can be trumped by the government spin.

In any case, "sharing the proceds of growth" assumes a reduction in public spending in order to create room for tax cuts. Hence my disapointment at the way you phrased the heading.