Punk tax-cutting?

Danny Finkelstein - one of politics' nice guys - grabbed attention with his "punk tax cutters" soundbite but it hasn't helped anyone understand the very different tax policies of the political parties (and of commentators and bloggers).

As we've written before, Danny sometimes appears as though he is stuck in the mid-1990s.  We imagine him going home and watching This Life DVDs and listening to Portishead.  The enormous thing that has changed since Danny was at William Hague's side from 1997 to 2001 (and was burnt by previous promises to cut taxes) is a massive change in the public mood.  Voters have paid their taxes to the Blair-Brown machine and haven't seen commensurate improvements to the public services.  They are ready for a refund. 

Voter readiness for relief is more urgent in recessionary times.  Tax relief now could help householders and businesses survive very difficult pressures.  ConHome believes that considerable tax reliefs could be funded by spending restraint.  Brown has presided over a massive increase in state spending.  Who believes that that money has been well spent?

Danny may think it unfair that the blogosphere has been agin him recently but he's backed the three big errors that have characterised Tory economic policy:

1. The belief that lower taxation produces no reliable dynamic benefits and every £1 of tax relief needs therefore to be "fully funded";
2. That Conservatives should match Labour spending plans (with this decision has come a missed opportunity to lead public opinion about waste and over-ambition in the Labour state);
3. Failure to use the economic crisis to wriggle free from (2).

None of this need be electorally consequential. ConHome believes that Labour is so broken that the Conservatives are still on course to win the next election. As economic gloom descends the Tory lead will grow again. Middle Britain's allergic reaction to debt will finish off Mr Brown's undeserved reputation for prudence. Our concerns aren't electoral but about getting a really worthwhile Conservative economic policy.

The Tory agenda for social reform remains the best hope for reducing the demands on government and for producing a sustainably smaller state.  What we need is a more urgent agenda for restoring Britain's economic competitiveness. That agenda must include a smaller state and lower, simpler taxes.

PS Danny blogs today that George Osborne gave 'punk tax cutters' what they wanted. No, he didn't. Because of his commitment to match Labour on spending the Shadow Chancellor is having to come up with bureaucratic, self-funding mechanisms like yesterday's recruitment subsidy.

Comments

[Louise]

I agree with most of the post - although our concerns should be electoral as the trend still appears to be downward even in this part of the crisis - but have to point out that Labour MPs aren't as broken as you assume them to be. Going by the Politics Home indicator, which you publish on the site, Labour morale is now higher than Tory morale.

It may be subjective, but I think we need to think more about that as a whole before we start making assumptions about the election.

FTR, you and Fink are in agreement on one thing - that the policy was a pile of pants. If this is the standard of what comes out of CCHQ, we need to stop assuming the Government will lose and actively start trying to win.

[Andrew Lilico]

a) Our general policy stance should, for a long time, have been that we aspired to keep the role of the state to the minimum necessary, and certainly to less than that favoured by the Labour Party. There would be specific consequences to that, but the general consequence could be seen that we would anticipate spending less, in aggregate and as a percentage of the economy, than would the Labour Party, and hence would tax less. This was true before. It is true now.

b) Current circumstances justify our thinking about borrowing-funded tax cuts. These should be regarded as distinct from the above.

I believe both (a) and (b) are true. I am unclear which of these is viewed by Finkelstein as "punk tax cutting". Or does he, perhaps, mean to criticise the following position (which I would also oppose), namely:

c) We should commit to cutting taxes, so as to force ourselves to find spending savings.

[The Bishop Swine]

I honestly don't think it was a bad policy at all, my feeling is it is a start in the right direction. It also demonstrates that DC and team are able to think a little outside of the box. The notion of accounting for what would happen unless, and then giving some of that unless money to somebody to make certain a person gets back to work is a really good one. I think it needs to go further with £10,000 being on offer to companies to take on the very long term unemployed and even dare I say more, to employ a disabled person who needs investments made to support them at work. Of course these would be large sums but “unless” somebody employs these people the state will have to find a lot more money in the long term. I believe that for the first time in a long time DC and I are sharing the same hymn book.

[GB£.com (33% of Tories disagree)]

The Tory announcements were flunk not punk.

[snegchui]

It would appear that the Tories are fixated on this idea that Labour will steal all their clothes and so commit to very little.
The picture that is now emerging, perhaps has emerged, is timid, unco-ordinated policy that is certainly less trhan the sum of its parts.
We are in exceptional times, I think everybody can agree on this, and therefore making execeptional or out-of-the box recommendations suggestions is acceptable.
Breaking free of the commit to Labour spending would be a very good thing to do, because I believe Labour are now on a path of turning a good idea (of shoring the banks) very bad (huge unnecessary debt by focussing on immediate repayment of bank debt (which is being resisted successfully) to fund some black holes).
BERR must promote business regulation-freeing and productivity-greasing policies swiftly. The tax system needs a good poke and the overstaffing of the public sector needs redeploying and pruning.
Grandsatnding on a world stage, and laying the onus of solution on co-ordinated Central Bank rate-cutting is not going to do it for the UK.

[GB£.com (33% of Tories disagree)]

omg. Have you seen GBP vs the Euro today?

[Norm Brainer]

Not good against the dollar either... just under 1.5$/£ at the moment

[James maskell]

Where is the revolution that Cameron promised? The policies Im hearing sound like tinkering around the edges.

Cameron needs to make it clear about what the role of Government should be and therefore at what point we are expanding beyond such boundaries. Cameron has talked of cutting back on waste and yet wishes to have a quango for the Chancellor's own budget.

Cameron has been playing catch up for months and with the wind back in his sails, he will feel more confident in beating off Tory attacks.

[Punk Oakley]

Presumably, "punk tax cuts" is meant to be derogatory. The two serious proposals by proponents may be radical but are by no means irrational.

1) Increase the personal allowance to the poverty pay level of £10-£14,000 and end the benefits trap. Labour's plans for further tinkering with tax credits will simply exacerbate that trap.

2) Introduce a flat tax. It has helped the economies of many eastern European states to grow from the ruins of communism. It would help us to weather the recession.

A Prog Rock tax policy, ie more of the same, has little to recommend it.

BTW Tim - your photoshopping is appalling. Those are New Romantic haircuts, for shame!

[Norm Brainer]

New Romantic? Maybe Cameron's is but brown's looks more like emo hair.

[The Bishop Swine]

"omg. Have you seen GBP vs the Euro today?"

"Not good against the dollar either... just under 1.5$/£ at the moment"

The markets clearly feel that we are printing to many pounds. I tend to agree BTW.

Don't worry to much the pound should bounce back after a while, but not to the heights it recently reached against the Doller.
Its a market mechanism kicking in and its good for our (small) export industry.

[Slam Dunk Da Fink]

"Danny sometimes appears as though he is stuck in the mid-1990s. We imagine him going home and watching This Life DVDs and listening to Portishead. "

And this is a 'bad thing' ??