Conservative Home's debate blogs

Advertising

  • DVD rental
  • Conservative Books
My Photo

Conservative blogs

Blog powered by Typepad

  • Tracker 2
  • Extreme Tracker

« Four more MPs declare for David Davis | Main | 'Neocon Fox' exposes China's connections with Iran and Zimbabwe »

Comments

Wat Tyler

Words...yes, aren't they great? I was just listening to another of those bloodboiling BBC news "reports", where they said "Ministers ACKOWLEDGE X, but INSIST it's improving." Whereas you or I might report it more objectively as "Ministers ADMIT X, but CLAIM it's improving."

So the right tax language, yes.

But also, any tax simplification proposals we make must be developed and presented in their broader policy context- we have a programme which will tackle our social as well as our economic problems. And one important element is to lift a large section of the population out of income tax altogether.

I think- as you say- Angie's mistake was to drop it in a late stage and it came across as part of that unpleasant economic medicine she and that mad prof guy were going to dollop out the the German patient- whether he wanted it or not. The patient got to wondering what other medical experiments might be lined up out of sight.

James Hellyer


Bar the neo-con slur, Ken might actually have a point about the flat tax. Unless the allowances and rates were set unfeasibly high, the burden faced by the middle income earners would increase dramatically. The only other way around that is to link the tax's introduction with a reduction in public spending. Tax cuts might promote growth and allow the "pie" to get bigger, but they won't do so overnight. With a fat tax you'd either have to run a deficit at first, or clobber the middle income earners. Neither are election winning options.

EU Serf

There are easily several billionas of pounds worth of coordinators and facilitators to sack from the civil service. That could pay for the introduction of a flat tax.

Wat is correct (what else would we expect) when he says that the mistake was dropping it in late in the campaign. If we want to see flatter simpler taxes in the UK we need a long period of getting the public used to it, hence the need for very public debate now.

Dom

The results in New Zealand and Germany also shared one other thing: an on-the-night switch back to the centre-left. The conservative oppostions in both countries had been surging in the weeks leading up to the polls, with 6-8 point leads. It seems the electorates, when it came to the crunch, may have looked beyond the promised sugar-coated hand-outs from the oppoistions and voted on a range of issues instead.

The other thing to note in New Zealand is that race, as well as tax, played a major role in how the National Party played the election. It's hard to know what backfired here.

Selsdon Man

New Zealand has already experienced and benefited from radical free market reforms. It used to have one of the most centralised economies but now, even after Labour governments, it has one of the freest. NZ is a natural candidate for the flat tax.

Germany, by contrast, has a different culture of social democracy. There is an old-fashioned suspicion of change. Merkel took a needless risk and paid the price.

malcolm

I hope the Conservative party will reflect seriously on the German election.There are many differences between the two nations but we can I think still take some lessons.
Germany has been led by someone who usually talked a good game but at least in terms of the economy failed to deliver on his promises....to put it mildly.
He continued to talk a good game throughout the election campaign despite evidence available everywhere that he was not telling the truth a significant proportion of the German people believed him.The believed him because the wanted to and nothing Merkel could say could persuade them otherwise.
From this I think we should take at least two lessons.First we cannot rely on the British people to desert Labour if the economy stagnates in the next 2-3 years.The situation in Germany is far worse and 35% of people still voted for the party responsible.
More importantly we need to develope a credible economic policy soon and sell it to the public hard until the next election.Putting together a policy a few weeks before the election as both Merkel and Michael Howard did and asking the public to believe it will result in failure.
One positive thing 'though is that the events of the next few weeks will hopefully kill the issue of Proportional Representation stone dead.

Mark O'Brien

I'm still convinced by flat tax, and I'm proud to declare myself a firm advocate. With a personal allowance of around £12,000, every earner would be better off after tax. Families on below-average incomes currently pay 12% of their income in income tax - under this proposal, they would pay less than half that. Above average earners would be better off too, but not quite so much as lower earners. The richest 10% wouldm make a 1.4% saving, compared with the earners in the exact middle who make a 5.6% saving. The earners in the middle of those two points make a saving of between 0.3% and 1.3%. In essence, unless you evade your taxes already, you'll be better off under a 22%, £12,000 p.a. flat tax.

Readers might guess that I write whilst reading all these figures from a piece of paper. It is evident how difficult it is to explain in words the numbers in front of me, and that presentation issue is the biggest stumbling block for Conservatives who wish to advocate a flat tax. On the one hand, it sounds like a new tax ('we wish to introduce a flat-rate income tax...'). That never bodes well. On the other, it sounds like a flat amount of income tax, which was the greatest problem with the old poll tax. If we want to get over these (and if we actually do want to introduce the flat-rate!) then it will take long-term, sustained campaigning to prove that it is a good policy.

But, as James mentions above, the natural consequence is a deficit. One economist says a flat tax of 22% with a £12,000 p.a. would give us reduced revenues from income tax of around £50 billion. Proponents say that the ensuing economic growth, combined with efficiency savings in government, would offset the cost without making any controversial spending cuts. But I'm more cautious than that, and I don't think it's right to rely on growth and efficiency. That's why a flat-rate of income tax has to be combined with reforms elsewhere. I believe the easiest place to make immediate savings is through social security. If we look at the Wisconsin reforms of the 1990s, the miraculous savings in the welfare budget which were achieved would save us a lot of money if we came anywhere near their success. So, in terms of economic strategy, I personally think that if we pursued a programme of welfare reform from our first Budget, and waited until the second to introduce the flat tax, there would be no economic dangers to its introduction.

(But, of course, we've got to get elected on that programme first!!!)

Blimpish

Mark: sorry, but one of the main lessons of US welfare reform is that any financial savings were a long long way down the track - in some cases, states ended up spending more, not less. Unless you're going to kick benefit claimants into abject poverty - however motivating that might be, it's politically suicidal - there ain't no easy cuts here.

Mark O'Brien

What about Wisconsin? Their achievements were considerable in welfare reform, and - so far as I know - they didn't follow the same track as the rest of the United States but took a different approach, based on reducing 'benefits' (am I the only one who abhors that word?) if no work is taken up over the long-term combined with stricter testing for recipients would surely mean savings would be consierable in the short-term, and the broadened tax base by getting numbers back into work would mean we'd actually get returns on it too, long before we'd have to make any cutbacks for the sake of flat tax.

Blimpish

Wisconsin threw money at in-work subsidies, childcare, grants and soft loans - they were 'Work First', yes, but they concentrated on eliminating excuses rather than simply pushing people off welfare. They also focused on tightening eligibility for new claimants first, to stop the accumulation, and then using the money saved in doing so to buy those services to cut the existing stock of claimant.

Further, if you push most of these people back to work, they'll be doing marginal jobs that will often have to be propped up with tax credit (not to mention childcare and caseworker support, as in Wisconsin's W-2). Their net tax contribution would be pretty marginal. There are good reasons for doing welfare reform, including (in the long run) the potential to save some money - but there's no easy win here, not without injecting new life into Ken Loach's film career along the way.

Nick

This is a total misreading of the NZ elections. National improved its share of the vote over the last election almost entirely by squeezing out the far-right ACT party, which is NZ's true anti-tax party, and other smaller center-right parties. Labour held about steady in its share of the vote. Moreover, National wasn't pushing a flat tax, but the opposite: a significant increase in the income level at which the top 39% tax rate applied. National did not promised to cut the top rate. This would have *increased* the share of income tax paid by high-income taxpayers, where flat taxes typically would decrease that share.

Cutting taxes win elections

In New Zealand the National party was well behind when polls started, and clawed its way back into contention with its tax policies. ACT, a fine party from what I can deduce, went from a threat of being wiped out to winning 2 seats.

In Germany, the CDU's tax policies did not work for a simple reason, they were rubbish.

Promising to put up VAT, a big vote-winner that one, and hardly likely to cut the level of public spending. Cutting corporate tax rate by 3% - Germany would then have had a combined corporate tax rate of 37% - hey at least Germany would still have a rate lower than Japan, and only Japan in the OECD. That would have done nothing for investment in Germany. Germany's double-whammy business tax policy, raising minimal revenues, yet having a high rate that deters investment, screams for proper reform not tinkering. Merkel is hardly a German Thatcher, a German Ken Clarke would be more accurate.

If only Kirchoff had written a flat-tax policy for the CDU.....

James Hellyer


Although the first budget of the Thatcher government did double the rate of VAT...

Blimpish

Wasn't an election promise though!

James Hellyer


Well, yes. The election promise was not to increase the rate of VAT...

Blimpish

Back in the good old days when politicians never lied, eh?

James Hellyer


Back in the good old days when the opposition was in too much disarray to hold the government to account, and the electorate only noticed changes in direct taxation.

So not at all like now then.

Blimpish

Well, except for the upside that at least back then it was our lot shafting the taxpayer rather than their lot. Simple pleasures...

Blimpish

Except back then at least it was our lot shafting Johnny Public instead of their lot.

Blimpish

Weird- it seemed to lose that comment the first time, so I put it in again. Then it recovered it. (Just to explain that I'm not going insane - or any more insane, anyway.)

Selsdon Man

ACT describes itself as a liberal party, in the true classical sense of the word. It is not far-right - the typical smear of those who oppose individual liberty and low taxes. If you think think that ACT is extreme, try the Libertarianz Party!

Blimpish

SM: did you see the Free Democrats described on the Beeb as 'pro-business'? Obviously, favouring open competition that will expose the failings of weaker firms must be 'pro-business', with all the slightly seamier implications that has.

EU Serf

Blimpish

All parties claim to be Pro-Business when it suits them. As you rightly point out there is a huge chasm between pro-business and pro markets.

Blimpish

Serf: I meant that, as far as I'm aware, FDP are pro-free market but get characterised as pro-business.

Selsdon Man

The Free Democrats are very pro-free market. They are liberal on economics and social issues.

The comments to this entry are closed.

About Conservative Home

Subscribe

  • Conservative Home's
    free eMailing List
    Enter your name and email address below:
    Name:
    Email:
    Subscribe    
    Unsubscribe