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Comments

Derek

This is a critical area. Without being able to ask a supplementary question here we cannot ask DD to confirm whether he would still cut taxes even in a recession [which I understand to be the case] and if so what he regards as the upper limit of borrowing which is acceptable?

DC needs to explain in what proportion he would share the proceeds of growth between public services and tax cuts, and what action he would take in the event of a recession?

James Hellyer

Is deficit financing actually a problem in a recession? Public spending is required to amoleriate the effects of the recession, while tax cuts are needed to stimulate industry and consumers to work the country's way out of the recession.

Charlie

So DC for leader and DD for chancellor?

Editor

British levels of national debt stand VERY GOOD international comparison. Intl markets would look kindly on borrowing if it was related to tax relief targeted on economic competitiveness/ infrastructure etc.

RobD

DC - "I agree that lower and simpler taxes are essential components of what should be our principal aim: a comprehensive economic policy that helps create prosperity in an age of global competition."

This is a very encouraging quote from DC, he is is saying that lower taxes would be an essential part of his governments direction. This seems like a very sensible way to address the issue, much better than DD's carless approach.

Oberon Houston

High levels of borrowing are bad as it increases interest rates and suppresses bond values, hitting the primary capital market, the cost of borrowing in the secondary market and those with personal debt such as Mortgages.

David Davis' plan is irresponsible, and Cameron is right to say that promises cannot be made based on an uncertain future.

Mark Fulford

We're heading towards a consumer credit-bust, so relying on any growth to deliver tax cuts is optimistic. We have to cut costs, and we need policy to downsize government. Labour have employed 680,000 extra people. We have to reverse that trend, for example freezing the number of public sector employees. We have got to get a grip on public sector pensions, which are a disgrace.

The BCC will always complain about the cost of regulation but, in my business experience, the problem is overstated. I think both candidates are failing to take on the big issue: the public sector.

Wat Tyler

Not sure what a carless approach is, but DD's spending rule- which is the basis of his headline tax cuts- is fully explained on the Reform website. Including the issue about cyclical deficits.

The only surprise about Ed's meter reading is that it hasn't maxed on DD.

Oberon Houston

The best thing to do in a weak economy is reduce debt levels by cutting back on public spending.

Andrew

We're heading towards a consumer credit-bust, so relying on any growth to deliver tax cuts is optimistic.

We're not. We're relying on tax cuts to deliver growth. Totally different proposition.

Oberon Houston

If you want to know what happens to an economy that follows that approach - look at the Regan Administration. It does not work. Ask Alan Greenspan.

Wat Tyler

Oberon- yes, but Davis' plan wouldn't do those nasty things to the bond market.

Believe me, bond investors like rules that limit politicos' ability to spend. And they fully understand about cyclical deficits.

James Hellyer

"If you want to know what happens to an economy that follows that approach - look at the Regan Administration. It does not work."

It doesn't work if you massively increase public spending on defence so that public spending in total grows at a faster rate than the economy does even after incentivising tax cuts.

That's not what Davis is proposing, Oberon.

Oberon Houston

Feb. 25, 2004 Alan Greenspan:

"... under a range of reasonably plausible assumptions about spending and taxes, we could be in a situation in the decades ahead in which rapid increases in the unified budget deficit set in motion a dynamic in which large deficits result in ever-growing interest payments that augment deficits in future years. The resulting rise in the federal debt could drain funds away from private capital formation and thus over time slow the growth of living standards."

David Davis is ignoring this warning.

wasp

I would have called this one a draw. Cameron should have announced an intention to cut or simplify taxes in the first budget.

However Davis' plan is plainly ridiculous, he does not know how much money will be coming in or going out, he doesn't know what borrowing, inflation or taxation will be.

One answer is non-commital, the other is rash.

Andrew

Reagan, Oberon. But why not look at the Irish example - they've been cutting corporation tax and growing their direct foreign investment for years. Just one example of how careful tax cuts can boost growth.

James Hellyer

Oberon,

Greenspan is talking about ongoing deficit financing. Davis is not.

Wat Tyler

Yes...but that's not what DD is proposing. His tax cuts are financed up front by slowing the rate of spending growth.

It's a long way from Voodoo economics.

Kate Castle

I understand why you've gone for DD in this one, Tim, but I'm not so sure. The tax system is overly complex at the moment and I find a message about simplifying the system attractive. Now we need more meat on the bones from Cameron on this, but the 'flatter tax' Osbourne talked of not too long ago was more appealing to me than Davis' cutting agenda.

Oberon Houston

Jan. 25, 2001 Alan Greenspan, Senate Budget Committee testimony:

"The resulting budget projections, therefore, are necessarily subject to a relatively wide range of error.
...
"(I)f long-term fiscal stability is the criterion, it is far better, in my judgment, that the surpluses be lowered by tax reductions than by spending increases. The flurry of increases in outlays that occurred near the conclusion of last fall's budget deliberations is troubling because it makes the previous year's lack of discipline less likely to have been an aberration.
...
"But let me end on a cautionary note.... We need to resist those policies that could readily resurrect the deficits of the past and the fiscal imbalances that followed in their wake."

Brown did not follow his advice on the first paragraph, and Davis won't follow his advice on the second.

Mark Fulford

"We're relying on tax cuts to deliver growth. Totally different proposition"

I understand the proposition. I'm suggesting that the decline of consumer spending will offset the growth through tax cuts - and to predict net growth is optimistic.

Oberon Houston

Under Bush, the surplus has been spent due to his tax cuts and the US economy faces an uncertain future.

James Hellyer

Oberon, all you are doing is showing that youn can't compare like with like, but can cut and paste.

Martin Curtis

I disagree with this analysis. DD is setting hte Conservatives stall out too early and this hinders our election chances. The stance DC is taking is the best one for our elctoral chances.

Andrew

The stance DC is taking is the best one for our elctoral chances.

Totally disagree. When DC finally unveils his tax policy, 4 weeks before the next election, Labour will denounce it as cuts in public spending, as they always do, because DC will have failed to engage with the argument early enough to win it. DD wants to make the case now, early, so that we can win it, and go into the election promising changes that the public will believe we mean to enact.

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