The Tories need a responsible tax cut plan to beat Labour's irresponsible tax cut plan

Today we conclude the Next Steps Series that began on Monday.

Alistair Darling and Gordon Brown are widely expected to announce a package of tax reliefs.  The package will have three aims:

1. To speed Britain's recovery from recession;
2. To help small businesses and the low-paid (the two likeliest beneficiaries);
3. To put the Conservatives in the tricky position of opposing tax cuts.

You can be sure that objective three is at the front of Mr Brown's mind.  He wants to sow disunity in Tory ranks and he also wants to frame a contrast between Tory tax cuts for the rich (inheritance tax) with Labour's tax cuts for "hard-working families".  How should the Conservatives respond?  Iain Martin has learnt that "George Osborne's advice is to oppose it on the grounds that Brown and Darling would be doing it with borrowed money and that it will probably be a 10p tax style con."

That's not an unreasonable position.  Unlike Iain, Fraser Nelson and Andrew Lilico, ConservativeHome believes that the Conservatives are moving towards an economic policy that is politically credible.  The Tory message that Britain must live within its means and tighten all belts is one that will play well with middle England.  It isn't sexy but we predict that it is the political equal of Labour's stance of policy activism.  Further than that: if the Tories succeed in communicating the idea that Labour's borrowing is out of control then Brown is politically toast.

Having said that, however, the Conservatives will be in a better position if they are able to oppose Labour's irresponsible tax cut plan with a responsible Conservative tax cut plan.  If Labour intend to finance their tax plan with extra borrowing we should put forward our own tax relief plan and it should be funded by tighter control of public spending.

Matching Labour's spending plans has been the biggest strategic mistake of the Cameron-Osborne leadership.  The current economic crisis can be used to wriggle free from that pledge.  Labour plan to increase discretionary spending by more than 2%.  A tighter settlement could be used to force the public sector to tackle its wastefulness (Dan Hannan seeks a war on the quango state) and can be used for economy boosting tax relief.  We certainly believe that hard-pressed businesses and families will make better use of every pound that is given to them and taken away from Whitehall.

The Tory tax cut plan does not need to be as big as Labour's (although there is no reason why it couldn't be larger if we adopted a sufficiently hawkish approach to spending) but it's vital that - in addition to existing pledges on a council tax freeze and VAT holiday - we join Barack Obama, John McCain, Nick Clegg and Gordon Brown in offering our own tax relief plan.  You don't beat something with nothing.

Step 7/10: Prepare for next year's European Elections

Comments

[Henry Mayhew - ukipper]

This will be fascinating. Great story CH.

Now we will see what Cameroons are made of. I will be utterly delighted to be proved wrong. It is critical for this country to find out that they do have a conservative vision of small state, big community and low taxes.

Mr Cameron must widen his circle of advisers to bring in people with real expertise and experience in order to achieve this. It will surely be impossible with the usual CCHQ crowd.

The best of British to you Sir.

[Matthew Reynolds]

We need to grow public spending by less than Labour so that in the short term we can move resources to the private sector & get the economy moving again in the short term. In the longer term once an upswing is underway we need a tight grip on public spending so as to be able to rein in the PSBR that could be a real drag on any recovery in terms of economic stability being compromised .

I think on top of the VAT holiday & council tax freeze we need tax on share/dividend & savings income to be suspended for three years to boost share prices & the level of saving . Stamp duty could be 100% suspended for three years to stop that pointless tax being a drag on faltering share & property markets . VED & fuel duties could be 100% frozen for three years to hold down transportation costs so as to help business and to keep inflation down. National Insurance could be cut by 1% for the self employed & employers so that employment costs could be lower for three years just to hold down the dole queues. Finally all taxpayers could get a one off £240 rebate in April 2009 - this would be double the 10p tax compensation and would be for all taxpayers rather than just 20p payers under 65 . That would be more generous and could have a bigger impact . Between 2010-11 and 2011-12 tax allowances could be raised by £1,200 over & above prices allowing everyone to keep an extra £100 a month free from tax which would be popular and helpful to the majority feeling the pinch.

As to spending cuts the £100 billion we waste on public bodies like QUANGO's , the £2.5 billion spent on tax credits for the wealthy , overseas aid for China ( that does not need it ) freezing civil service recruitment , replacing Job Seekers Allowance & Incapacity Benefit with one payment to slash economic inactivity , axing as many IT & PFI schemes as possible , ending ID cards , better value for money on procurement costs via a greater use of market forces and sending less money to Brussels when their own accounts cannot be signed off are all areas that economies can be made .

So there can be smaller government , a mainly temporary cut in the tax burden and longer term reductions in public borrowing if we put our minds to it. But I suspect that many of the tax cuts that I suggest could be kept for good as revoking them could hurt the economy and they could be retained if enough was cut from public spending over three years . The £240 rebate could be a one off in view of higher tax allowances giving people the same amount by 2011-12 .

[Andrew Lilico]

I agree that the Front Bench's position is, for the moment, economically defensible. As such, there *ought* to be some way to make it politically credible. But the problem is that out "disarmament" approach on economic policy was so extensive and committed, and our mishandling of certain key events (such as the early part of the Northern Rock saga) so damaging that we don't have the underlying credibility with the public and journalists on economic policy that would be necessary for us to sell a "boring but right" stance. We're well behind the curve now, and need something clearer and more divisive to get us back in the game.

[Ben, Newark]

A war on the quango state would be very much to be welcomed - could we start with Osborne's main previous policy plank, the Office for Budget Regulation?

[Mike Routhorn]

Unless Cameron and Osborne can come up with a clear, bold and consistent economic message we run the dire danger of letting Labour frame the debate and having the public thinking there is no alternative.

[cement man]

Good luck with that idea but I fear it is the triumph of hope over experience with this lot.

[michael m]

The only answer Labour have at the moment is to ask what we would do- a trap we are in danger of falling into.
The Blair Brown tactic in 1994/7 was to slam the Major Government- remember how many time s they repeated 20 tax rises?- and never really put forward any policies of their own until the election.
I think we are in danger of being set up here by Brown and his cronies. The important thing is that we hammer home the message how they have failed, supported by a general message of optimism.

Why are we not having any concerted effort by the entire shadow cabinet to nail this government and how all their boasts have now come home to haunt them?

[PP]

Labour 'help' for small business and the poor should be characterised for what it really is - they are taking their foot off the head of the man they have been drowning for the past decade. They are the sole reason that any 'help' is needed.

Most people are fully aware of the perils of borrowing beyond what you can repay -- it just needs to be clearly explained to them, that labour are acting precisely like a naieve teenager with half a dozen credit cards maxed out, but with a brand new one just arrived in the post... Unreformed spendaholics with a new line of credit to plunder.

A tighter settlement could be used to force the public sector to tackle its wastefulness

This I think is daft - the public sector can't reform itself, don't waste time watching them fail to do it yet again - more likely services will fail, and the treasury gets the blame.

Build the public sector that is required, and dump the current one in landfill.

[christina Speight]

The planks the party must use to create a complete strategy are all there. The first ably demonstrated by Osborne yesterday is no extra borrowing for tax cuts. BUT tax cuts would be essential in ridding ourselves of the recession .

Therefore these cuts must be funded by cutting expenditure. There are several identifiable cuts that would be popular cuts. Two immediately spring to mind - ID Cards and stopping any further waste on the failed NHS national computer system (hated by professionals in the NHS). Others could add to that brief selection of 'things people hate' including quangos. (My worry about the quango issue is that it has all the makings of a civil service obstructionist delaying action. The 'Sir Humphrys' of this world would bring the quango's functions 'in house' and would then claim they cost more.

When these savings are fully costed the tax cuts should be targeted at those who have suffered most - the raising of the tax threshold to help those going immediately into the main tax band and the squeezed middle-income groups. Then corporation tax must be considered too both to stop the flight of companies abroad and to maintain profitability and this employment.

[christina Speight]

PP at 1135 "Build the public sector that is required, and dump the current one in landfill."

Please NO! - The EU is driving up the penalty for landfill exponentially already. Each year the "tax" doubles! That would be the last straw!

[Spin Bowler - In the Brown... Political Blog]

The more i think about it, the more convinced i am that the Conservatives should not respond to Brown's politically calculated tax cut ploy. The Conservatives are rightly positioning themselves as the 'responsible' party in sharp contrast to Brown who has borrowed, taxed and spent and got us into the mess only now to offer more borrowing, spending and another cynical tax cut (remember the 'Tax Con' Budget and the 10p rate of income tax anyone?) to get us out of it.

If the Conservatives are spooked into responding all they will be doing is showing that Brown is setting the agenda and they are merely jumping through his hoops. Osborne and Cameron need to stick to their agenda. I'd doubt Labour's tax cuts would be substantial - if they materialise at all - and the Conservatives have already offered modest tax cuts, including pledging not to to raise corporation tax on small businesses as the government plans.

I also doubt whether Brown would win much media support for his type of irresponsible tax cut. Headlines such as "Spend, spend, spend" were also met with critical editorials denouncing higher spending funded by yet more borrowing. I'd expect the newspapers to be as critical, if not more, of a cynical move by Brown to outflank the Tories on tax funded by more borrowing.

As a final point, I'd remind people that whenever Brown tries to play political games, such as the 10p tax fiasco and last years Pre-Budget Report with inheritance tax, he always ends up in the brown stuff!

http://inthebrown.blogspot.com/2008/11/labours-irresponsible-tax-cuts.html

[MG]

Define specific things that are unpopular but Labour are commited to, but could be cut to fund tax relief to small businesses and the low paid. Other than that to point to Labour's growing debt and that this will stop us trying to get out of recession when that bites.

[Malcolm Dunn]

I watched George Osborne speak and found myself in agreement with about the need to refrain from irresponsible borrowing. Borrowing to fund a tax cut would be just as irresponsible as some of the more half witted spending increases sanctioned by Brown.
If we are to press for tax cuts we need to identify EXACTLY where we can reduce public spending.Otherwise we are no better than them.

[Resident Leftie]

"George Osborne's advice is to oppose it on the grounds that Brown and Darling would be doing it with borrowed money and that it will probably be a 10p tax style con."

How about you wait until you see what the proposals are before opposing them in advance for cheap political advantage?

If you are against borrowing and for tax cuts, there is only one policy, and the Tories are still too ashamed to admit it. Cut public expenditure to reduce borrowing and taxes. That should be the policy.

Give us that real choice.

[Tim Montgomerie]

Malcolm,

I would impose a new ceiling on spending so that people in charge of budgets were forced to make economies. They are best placed to make such judgments. Nearly every family in the country is having to do the same and is finding that many non-essential things can be done without for the next year or two. I've never thought it particularly sensible for out-of-office politicians to identify the best source of savings. Managers could be incentivised to find savings.

Having said that there are some programmes that could go altogether. I support the TaxPayers' Alliance's call for the abolition of RDAs. The New Deal could also be scrapped given its terrible failure.

I also support a recruitment freeze but have already suggested that that should largely go to the rebuilding of our armed forces.

[Malcolm Dunn]

That sounds fine Tim,just as long as we identify how much we can reduce spending and identify where from before we commit to tax cuts. It's the only responsible way to behave.

[Louise]

Tim - how much notice do the Tories take of your missives and strategies? I'd like to do a blog post on this but I'm afraid the answer would be "not much".

The problems are we are not able to offer much in the way of high-profile public policy with Osborne thinking the LSE is the forum to launch a key part of Tory policy. Howard grabbed me into the Conservative family because he knew policies had to have a marketing strategy attached, at crucial times. After the 2004 conference the atmosphere was buzzing because he had put down everything on paper and Labour were unable to offer more than watered-down versions of that Timetable for Action. Given the election may be May if Brown wins Glenrothes, do we have enough time to put things out in the way we need to, given that conference didn't produce anything electorally orientated?

That should be the eleventh step - make more direct noise rather than interminable speeches to proto-investment bankers (I may be ex-LSE myself and not one but I am under no illusion that's who Osborne's main audience was) and clever insults at PMQs. Most Tory policy goes way over the heads of people who will decide the next election.

We need less thinking, more doing, just in case things go Labour's way so much that a May or June 2009 election becomes credible again.

[pp]

If you are against borrowing and for tax cuts, there is only one policy, and the Tories are still too ashamed to admit it. Cut public expenditure to reduce borrowing and taxes. That should be the policy.

The lefty is correct.

However to avoid mis-representation, Browns chavvy attitude that you assess quality by amount spent, rather than by value delivered needs to be exposed for the nonsense it is.

Cutting spending is not the same as cutting services.

Note the OAP's who have rejected free swimming (government olympic legacy nonsense) substantially because they prefer to pay directly so they are treated as customers and valued, rather than looked down on as an expense/drain on public funds.

People do value choice, but they have to have confidence that if a 'service' is cut, they *will* have the money back to get it privately if they want it...

If swimming was already free, and the OAP's were told that the benefit was going in return for a tax cut I am sure the reaction would be different -- they wouldn't really beleive that they would ever get the money...

[Opinicus]

People are not looking for political credibility - that is so 2000. They are looking for a man with a plan.

They are looking for analysis and for a way out from under. They want new ideas and Hope rather than an incremental slowing of an inevitable decline into national fatuity.

The times are desperate. They call for radical measures. Somebody sack Hilton before he does for us all.

[DCMX]

Louise: "Tim - how much notice do the Tories take of your missives and strategies?"

Zero notice.

The Cameronites don't take notice of anyone. They are full of themselves.

[Louise]

OK DCMX, you're on. If they don't even take notice of Tim then they really are screwed in the long run. I'll look at it next after Glenrothes.

[pp]

I think it is unrealistic for the tories to deliver answers on specific cuts - the government have all the details and could cut the legs out from under them at anytime.

I don't like quangos (I don't like the public sector at all -- but like tax accept it as a necessary evil, so the less the better) so was initially against the 'Office for Budget Regulation' -- however it seems that there is need for such a function, the 'problem' being how to prevent it going native and spending all of its budget on schemes to increase its buget and staffing levels - maybe have two, with unsalaried staff, and let them divide up 10% of all savings they make. Their job *has* to be to put as many public servants out of work as possible, minimising costs while preserving whatever minimum level of service is acceptible - that is the truth of it.

[christina Speight]

I've already listed here vtwo items one of which has already thrown £12 bn away down the drain and the other is estimated (ha, ha!) to cost £15bn. The Labour party is wedded to both and both are unpopular. Total saving should be at least £10bn straight off and nobody will raise a finger (except Resident Leftie) of protest. There would be more like that b iut scrapping both programmes is a single administrative decision. Unlike quangos and RDAs which would get bogged dowen in civil service 'fine-tuning' (-sabotage!)

In any case RDAs OR SIMILAR are an EU necessity - we have to do as we are told or funds (of our own money) would be blocked.

[ChrisD]

"ConservativeHome believes that the Conservatives are moving towards an economic policy that is politically credible. The Tory message that Britain must live within its means and tighten all belts is one that will play well with middle England. It isn't sexy but we predict that it is the political equal of Labour's stance of policy activism. Further than that: if the Tories succeed in communicating the idea that Labour's borrowing is out of control then Brown is politically toast."

Tim, you have nailed this down succinctly.
At the moment, Osborne is getting it right, and we should follow our own agenda rather than try and respond to the governments actions. They are at this moment flaying around trying to keep their political necks above water until the GE.

They have been the stewards the UK economy and the presided over a debt which would have been more in keeping with a country coming out of a recession, not one that has supposedly ridden the wave of a benign one.

We have got to nail them hard on their irresponsible and incompetent management of our economy during the last 11 years.
Brown was not a good Chancellor, never mind even a mediocre one, he has been utterly economically illiterate. His whole policy platform has been wedded to his and his party's political needs rather than what was best for the UK in the long term.

With the present levels of debt, we are not in a good place to weather this economic storm, you can't spend your way out of a mess you spent your way into. When Darling announces his PBR, it won't deliver the honest long term tough decisions needed to help us through this, never mind form the foundations for climbing out of this horrendous black hole of debt. Instead, they will deliver a short term political budget aimed at giving them breathing space.

Osborne gets it, Danny Finkelstein gets it, we need honesty and tough decisions for the longer term future of this country.
The public are not stupid, they know that the extra money now is coming from borrowing and will have to be paid for by taxation for years to come.

We don't try and outbid Brown and Darling just now, we tell the truth about debt and borrowing. And then we build an economic manifesto for the next GE which will try to navigate us out of the mess left by this government. Quite simple, we oppose this governments attempts at getting them selves out of this mess politically. And if we get that message across, then we do not have to sell either public spending cuts or modest tax cuts, if they are coupled with a real attempt at tackling the huge debt we have accrued and the need to kick start the economy again. We need to prepare the ground for that manifesto now, and in doing so we are hitting this government politically hard now too.

We do not tie ourselves up in knots with parts of the political media over tax or public spending cuts just now. Honesty about the mess we are in, and some hard talking about the tough decisions needed to get us out of it. We are not getting either honesty or leadership from this government. In fact their dishonesty about the figures is now getting a bit scary.

As Tim puts it, being honest about the harsh realities of this recession is not sexy, but it will resonate with the public. The electorate will I predict become a lot more politically savvy when times are tough, just as they switch off when they are benign.
Just notice the jump in turn out at some of the more recent by elections.

Osborne reckons that Brown and Darling have no room to manoeuvre, there is no big Keynsian spending plan, its just another classic example of Brown spin and dishonesty. That is what will do for him in the end. If there are taxcuts, there will be tax hikes elsewhere cleverly hidden. Cameron and Osborne need to get the gloves off and nail this man and his government's dishonesty.

[Dave B]

@Christina Speight

"In any case RDAs OR SIMILAR are an EU necessity - we have to do as we are told or funds (of our own money) would be blocked."

Do they have to be stand alone organizations? Wouldn't it be possible to pass their responsibilities to local gov't, who could co-operate where EU grant funding required it?