October 19, 2006

Tax cutting tories

For all the rhetoric of the past few months, that public services are safe under the Tories, the future of the welfare state is garenteed under a Cameron premiership, we finally see the true blue members of the Tory party coming up for air. Today, one of Cameron’s policy think tanks has unveiled recommendations to reduce tax by £21bn. How nice!

[Edit: I realise this is a bit misleading. The Tax Reform Commission in fact only contained one member directly associated with the party. However, as I said in the comments, it wasn’t exactly a well balanced team of people. All bar one or two have specific interests in a lower tax regime, or had previously showed a great inclination toward lower taxes. These people were picked by George Osbourne. The only conclusion is that he wanted this outcome. The result: “want tax cuts? no problem, vote for us! Don’t want tax cuts? well that’s just an ‘idea’, we won’t do it really” ]

Unfortunately, the plans are incredibly regressive. The claim, obviously being touted by the Labour party at the moment, is backed up my the independant Institue of Fiscal Studies (IFS). It will be interesting to see how the Conservatives respond to this after years of using the IFS’s reports in their accusations against Gordon Brown.

Indeed, they are out in force doing damage limitation already. Deputy Cameron-in-chief George Osbourne is doing the rounds saying that he wants “this report to start a major political debate in this country about how we can make our taxes simple, fair and competitive.” Read: flat tax. Does he realise why our tax system in so complex? It is industry’s commitment to piling more and more resources into tax avoidance. Of course it has to be complex, otherwise billions of the revenue rightly due to the state simply wouldn’t get paid. The perception by the public that the taxman is needlessly causing companies so much strife over tax will only be further strengthened by comments from Lord Forsyth who led the commision that wrote this report saying, “it is clear that Britain needs a less complex and more competitive tax system” as if it’s some sort of self-evident tautology. Less complex means easier to fiddle, and more competitive means lower, even though we still are still behind the EU average for percetage of GDP being paid in tax. Even though we are actually ahead of the low tax haven the US in terms of levels of business freedom (I did read this somewhere, but can’t find the link, you’re going to have to trust me).

Let’s look at those IFS comments in more detail:

“It’s quite clear that these proposals would benefit the rich. Inheritance tax cuts, income tax cuts are going to benefit people in the top half of income distribution.” Carl Emmerson, Deputy Director of IFS

Pretty damning if you care in the slightest about social justice, and furthermore if you realise the fact that the top percentiles in terms of income already pay less as a proportion of their income in tax than the lowest earners in society.

So £21 billion (although some say £30 billion is a closer estimate of the extend of the cuts). How will this be funded? Cameron’s answer: green taxes, which will plug the gap and allow spending on public services to continue.. A tax which in principle I completely agree with. Aside from at best being income neutral, at worst even more regressive, the problem is that the income from green taxes, if implemented properly, should fall dramatically as they are designed to alter our behaviour. Final result: less money in the Government coffers, less investment in our public services. I must hand it to our ‘Dave’. Stealth tax cuts… impressive.

- 2 comments by 1 or more people Not publicly viewable

  1. bah, by far the most wrong thing you’ve ever posted on the blog. Firstly this is a proposal which has been made to him, not the party’s policy – I would have thought that the Labour Party (for you seem to have bought into Ed Balls’ lies here) who try to make such a big thing of policy would be able to tell when something is and isn’t a policy.

    But lets follow your line of arguement here…
    1)I say Blair should murder more people, this would be a good policy for him.
    2)OMG!!!!11! Blair said he wants to kill people

    You see what I mean here… maybe Cameron might take on some of these ideas, and most people I’ve heard talking about it suggest that some of the policies would infact be very possitive (like getting rid of stamp duty on shares, which it was claimed could generate over £650m for the economy). Some of them seem like the would help the worse off (a drop in income tax). Some of the ideas would be overwhelmingly possitive for the majority of people (no inheretance tax on the family home – if a young person, say 18, has their parents die then they might be forced to sell their house in order to pay death duties, which would be even more upseting than it was already). Simplifying the tax system would also be possitive I think, it’s gotten far too complicated for most people to understand so a lot of people don’t pay what they owe and the bureaucracy has to be paid far too much because of the complexities of their jobs.
    Even so, not one of these ideas (even though some of them seem at least this far to be very possitive) are policies. They are mearly ideas.

    Please don’t be so wrong again.

    19 Oct 2006, 18:10

  2. This commission was instigated by George Osborne. He packed it with business leaders, members of the CBI, and old Tories. You really think any other result out of this commission was in any way probable? I’ve looked at the members of the commision. Only one member in their little blurb had the word ‘welfare’ or any reference to expertise in public services. This was a biased commitee, set up by the Tories to give them justification for retreating from investment in public services.

    When the party continues to make moves pressurising Cameron to adopt the policy of tax cuts, and this biased policy think tank set up by Osbourne, undoubtlably at the behest of Cameron, publishes a report advocating £21bn of cuts that unfairly benefit the rich, I think I have a right to criticise the direction in which they are going.

    In addition, the idea of cuts being funded by green taxes was suggested by Cameron himself I believe, so I’d leave that one outside your critique.

    Cameron cannot hide behind the facade of “not wanting to commit to policy decisions” for much longer. The party behind him is chomping at the bit, and he will be rightly labelled weak by both his party and the population at large. People want to know what the Tory party will stand for under Cameron and will eventually tire of his deceitful, ‘cuddly’ exterior.

    As a side note, I’m sure if Ed Balls set up a thinktank chaired by Neil Kinnock and containing a bunch of neo-Marxists and Trotskis in order to “advise Gordon Brown” you’d perfrom exactly the same critique on their ‘findings’.

    19 Oct 2006, 21:10

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