Sharing the proceeds of growth pain

Must-read article by Lord (Michael) Forsyth in The Daily Telegraph.  Here are the money quotes with our commentary:

• "The priority must be to contain public expenditure and cut taxes, particularly for the poorest."  Yes, tax cuts must be on the agenda but, in the spirit of compassionate conservatism, they must be targeted on low income workers and those on fixed incomes. That means council tax relief and/ or a higher basic threshold for the payment of income tax.
• ""Sharing the proceeds of growth" may have been a slick slogan during the boom years, but it is hopelessly ill-suited to the conditions we now face. The mantra for the public sector must be "sharing the pain"." Simon Chapman got their first but, yes, it's only fair that the public sector faces some of the same restraints threatening to overwhelm private businesses and families.
• "George Osborne should be applauded for this week signalling a change in approach by acknowledging that government spending plans are unaffordable." Yes Mr O made the call, but our understanding is that the lion's share of credit must go to David Cameron. Our sources - for last Sunday's ConHome exclusive - say that it was the Tory leader who made the running on this policy shift.  Since observing the potency of the low tax message in May's local election results Mr Cameron has been something of a convert to the more hawkish view on tax.
• "What is needed is an urgent reallocation of resources from unproductive Labour public spending on expensive and wasteful quangos to the productive parts of the economy. With businesses relocating abroad to escape tax and regulation, would the £2.7 billion the taxpayer spends on Regional Development Agencies not be better deployed cutting corporation tax?" The TPA made the RDA proposal some weeks ago. We'd also recommend a 'flexible freeze' in public sector recruitment - the proceeds of which should be shared between economy-boosting tax relief and emergency support for the armed forces.

But here's the big quote from Lord Forsyth's piece:

"Brown may be preparing to raise taxes on the middle classes yet again. In a little-noticed move just before the summer recess, the Treasury sneaked through an amendment to the National Insurance Bill removing the restriction on raising the upper earnings limit for employee NI contributions - a ruse that would enable the Chancellor to increase tax and national insurance on those earning more than £40,000 from 41 per cent to 51 per cent by order."

It certainly wasn't noticed at all by us.  We need some journalists to ask Mr Darling to rule out use of this new tax-raising power (we are going to forward the quote to three of them).  If he doesn't we need a campaign from our frontbench warning people of the Chancellor's secret plan.

Comments

[John Moss]

There are also a huge number of things the Party could do to stop people having to spend their money on things Labour are requiring them to, like HIPs.

We could also delay some costs, like renewing Passports and Driving Licenses, by giving them a five year extension from their stated expiry date, delaying if not removing entirely a substantial cost.

It has been estimated that the totalextra cost of renewing the photo on your driving license every ten years is £420 million. Four passport renewals for a family will cost £236! (I know, I'm just doing that)

That's a hefty "tax cut" without any pain!

[Andrew Woodman]

Good idea that is John. I'm coming up for renewals of both in the next year or two. I just hope the credit crunch is over by then so I can remortgage to pay for it!

[greg]

What is a "flexible freeze"? Another 1979, the consequences of which we are living with to this day.

[Sally Roberts]

"What is a "flexible freeze"?"

I think it is making decisions "on the hoof"!

[John Coles]

Why on earth is it the Party leader that pushes for tax reductions? What is wrong with the Shadow Chancellor? Is Mr Osborne unable to grasp the scope of the task he faces or is he just frit to get to grips with it?

[John W]

'Sharing the proceeds of growth over an economic cycle' is more than a slick slogan, it is a philosophy of government expenditure, and one that will mean a reduction in the general level of taxation over the medium- and long-terms. It is not something to abandoned when times become tough, particularly when we are attempting to build a reputation for economic competence.

[David Belchamber]

There is a moral imperative, too, behind raising the initial personal tax threshold up to subsistence level.
Poverty in this country is a disgrace and, if the conservatives can act to improve this situation significantly where Labour has so patently failed, it would not only be the morally right thing to do; it would also be very astute politically.
Trade unions and traditional Labour supporters would be given a practical demonstration of caring conservatism.

[Alan S]

There are 3 big reasons why we need to cut tax:-

1. To force some discipline on the wasteful state. Diet the fat state in other words.

2. To relieve the wealth creating half of the UK economy; business.

3. To help households cope with the recession.

[Richard Woolley]

You can't share the proceeds of growth when there is no growth. Tax cuts will therefore be needed to stimulate growth. There should be a freeze on public spending for five years.

[Norm Brainer]

I agree with John Moss that there does seem to be a lot more things where you are having to pay the government more often, be it paying for forms, cards or fines - yes some are probably avoidable if you don't never the house but it's still more of my money going to the government.

"The priority must be to contain public expenditure and cut taxes, particularly for the poorest."

Care has to be taken that the cut is aimed at the poor, but not exclusively given to them - otherwise it's going to be unfair on those that earn slightly more that it's not worth them working and also add another layer of red tape to define if you are poor enough or not, which means there's less to give out and harder to apply.

I'm not sure the public would stand for 51p taxes at £40k, but I guess that the government just don't care anymore.

[asquith]

If a tax cut is aimed at, say the first 10,000 of income, then it will benefit middle earners as well as low earners: they will get proportionately less, but the same amount in real terms. The space is left for reform/abolition of tax credits while leaving incomes unchanged & benefiting single, childless & young people, whose numbers rise steadily every year but who get a raw deal currently.

This is Liberal Democrat policy, which aims to reduce the role of the state when possible & cut the tax burden for those least able to bear it, which is a noble & very redistributive aim rather than the Tory plans on IHT which will only benefit those already wealthy.

The government should cut taxes on work & consumption, which are essential activities, not inheritance. People struggling to make their own way in life should not be subsidising those who pick up unearned income (which includes the tribe of buy to let landlords whose irresponsible behaviour has played a large role in bringing the credit crunch about).

The return of fiscal discipline & the easing of the pain for people trying to forge their own path are necessary.

[lsfs]

Well done Michael Forsyth for speaking out against the cynicism and dishonesty of Cameron and little Gideon Osborne.

What would it be like if better people were in charge at this point in time?

[INK]

It's very nice of Michael to say such politely nice things about Osborne after he had people in the party brief against him and his report for recommending tax cuts.

Who is part of the "nasty" party there?

[christina Speight]

How many more times must I say on this blog that HIPS are now pared down to the minimum Brussels will permit? This is an EU imposition. We cannot change it! (John Moss this time!)

lsfs @1435 "What would it be like if better people were in charge" It would be better, is the short answer but legions of people desperate may vote Tory but while holding their noses while they do it.

[John Moss]

Christina,

We can suspend HIPs, but not the Energy Performance Certificate. The search and condition "survey" are worthless and not part of the EU requirements. As a Chartered Surveyor I should know!

We could also scrap EPCs for all but new homes if we were prepared to be French and stick two fingers up at the EU.

[Matt Wright]

Brown triggered the credit crunch in various ways including when he undermined pensions people started investing in property.

[Patsy Sergeant]

Yes John Moss @ 18.46 ....'if we were prepared to be French and stick two fingers up at the EU.' You've got it right there!!

The French frequently seem to ignore the EU regulations that they don't like, and apparently they are NOT compelled to comply - if they were, I am sure the whole of Europe would hear about it. I seem to remember that they did 'their own thing' during the 'mad cow' situation.

[Opinicus]

Our sources - for last Sunday's ConHome exclusive - say that it was the Tory leader who made the running on this policy shift. Since observing the potency of the low tax message in May's local election results Mr Cameron has been something of a convert to the more hawkish view on tax.

Does that mean I can go back on the Candidates List?

Treason is largely a question of dates - Prince Talleyrand