All entries for Thursday 19 October 2006

October 19, 2006

Taxation, taxation, taxation

Writing about web page http://news.bbc.co.uk/1/hi/uk_politics/6064034.stm

Interesting challenge ahead for David Cameron. In an amusing ‘from the grave’ swipe a tax reform working party set up by Michael Howard has recommended that the Conservative party back massive tax cuts – in the tune of £21bn.

This contradicts many of the messages DC et al have been giving recently about taxation – that they would not just leap into sweeping tax cuts.

Watching the news last night, it was noticable that Cameron and Letwin both looked like they wanted to back this, but couldn’t. The link between tax cuts and services is too close to make the kind of promises made in the 80s acceptable to the electorate.

What surprised me was that neither attempted to make the connection between taxation and value for money.

What strikes me is that people will tolerate higher taxes as long as they can see a return on investment – that the services they get in return balance the additional cost.

Where Labour has gone wrong in recent years is in failing to demonstrate that the additional revenue is resulting in more tangiable benefits for the tax payer.

The arguement on taxation has shifted from simply raising or lowering tax, to whether the party in office gets the best value from them. I don’t think Howard’s working group have that figured out yet.

Another interesting observation. On the BBC last night they showed a model which mapped the UK’s shift from a low-tax American system to a European style high-tax system. I would be interested to compare the American tax figures to Europes if the figures factored in the amount that is spent on private health insurance. I suspect that if you added the spend to the taxation you might end up with a number pretty similar to the European average.


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