What are the political risks and rewards of tax cuts?

Tiberius

It has always been my view that the Cameroons would introduce tax cuts. The scale of public expenditure has risen to such an extent under Brown that billions could be given away without anyone noticing a change in public services. The waste must be catastrophic.

I had thought that, for solely political reasons, Cameron would be in government before this happened. But the economic crisis has made anything possible, and a lot necessary.

So unless Brown is trying to sell Cameron the best dummy since Pele against Uruguay in the 1970 World Cup, the Tories have to bring forward any plans for tax cuts to avoid being cast adrift politically over the issue.

The question is why do the Tories always seem to have to watch what Labour are doing before they can raise their heads above the parapet. The answer to that lies in the politics that started in 1992-97, and concluded with Labour and the electorate allying themselves in a fools paradise consisting of having many cakes and eating them all at the same time. It is the polls that suggest this alignment may be coming apart, but not enough yet to allow the Tories complete freedom over policy, especially on tax and spend.

It is because of this constraint that I don't see a parallel with the Obama tax cuts. He was free to talk about the merits of his fiscal proposals because he didn't have to contend with the equivalent of the stranglehold that Labour has on the subject over here.

Screwtape

My dear Gabriel, you chrytallise our many disputes over the past months inside your final sentence - "He didn't have to contend with the stranglehold that Labour has on the subject over here."

And who, pray, allowed him that stranglehold and declined month in and month out to offer any arguments in favour of the alternative conservative agenda?

luke

I am hearing that far from being funded the tories are going to produce tax cuts based on down the line welfare savings.

Can that be true?

If so, its just borrowing by another name. It would be the ultimate BROWNIE, but this time from Cameron :)

DB

I think in the coming climate, the risks of a more radical strategy are diminishing, but the rewards are also lessening too.

Into 2005, people trusted Labour and saw Tory tax cuts as somehow dodgy, wreckless. Now, people suspect that Labour have sold us up the pass, and are worried that the country is spinning out of control.

The opportunity therefore is less in offering tax cuts than fiscal rectitude. In the good times, people take risks. In the austere times, people look for safety.

It's anyway unlikely that people historically vote Tory for tax cuts. They vote Tory because they feel the country's getting chaotic and want some stability.

Those wishing for cuts in spending to finance a radical strategy need to consider how rare it has been for a Government to actually cut public spending.

Such cuts have only been done a handful of times since the War, at the cost of significant political capital - and normally driven by deficit reduction rather than tax reduction.

There may will be plenty of waste in Government, although probably not nearly so much as there was in the 1980s. And in terms of what's left, it's very difficult to disaggregate the waste from the value without a lot of hard political nd policy work.

And don't forget - most of us think we need more money for defence. But that comes from the money we stashed behind the sofa.

Tiberius

My dear Screwtape, you misread your subject's history.

It is difficult to pin the crime on one man (or indeed a certain woman if Senor Portillo is to be believed)- I made a post recently listing a number of guilty parties, but it is clear we differ significantly over chronology.

Suffice to say, the object of your ridicule and wind-ups has been more successful than his four predecesors at loosening that stranglehold.

It is to be hoped that this success continues.

I remain yours...

Verity

What Obama says is irrelevant to the British condition, and irrelevant to the important part of the American economy, too. Obama is going to give tax credits to the unemployed. Can you credit it?

Matthew writes: The question is why do the Tories always seem to have to watch what Labour are doing before they can raise their heads above the parapet.

That is indeed the question.

And that is what makes the Tories, under the current leadership, unfit to govern. They have no thrust in their engine. They don't believe in anything. They don't know that the Conservatives out in the country do have a set of core values which govern their lives.

Cameron was a terrible, terrible mistake for our party. He has expended surreal amounts of energy on press releases demonstrating how much he relates to hoodies, grafitti "artists" and one-worlder environmentalists - none of which resonates with the core Tory voter. He has never addressed us once.

He apparently imagines he is being "inclusive" to people who will never vote Tory in a thousand years, and by so doing chased tens, perhaps hundreds, of thousands - perhaps millions - of us away from the party.

I, a lifetime Tory, as were my parents, will not be voting Tory as long as this fatuous individual is the leader.

But I'll be voting.

Verity

Screwtape - d'acuerdo.

Archie

Well indeed, Verity, and very succinctly put, as usual! Does anyone at Central Office read these or indeed any posts? The clamour for Cameron to actually deliver the goods has been deafening for some time and the recent Osborne farrago has dented the machine considerably, if not rendered it incapable of forward motion.

Screwtape

My dear Tiberius/Gabriel, what a rose-tinted and charitable view you on the lighter side are permitted to take of errant human behaviour.

For my part I see no loosening of the stranglehold of which you speak by your earthly charge. If any loosening has been started in recent weeks it has been by Clegg of all people, and by economic events.

Your charge did have his big chance a couple of weeks ago when my Master's shadow began speaking about a large increase in borrowing and a splurge in public expenditure. A chance your charge once again eschewed.

As his Guardian, I suggest you get your other earthly charge, the scribe, to speak to him more firmly in future and propel him rather more forcefully in a rightward direction.

Yours through a glass darkly

Screwtape

skooch

I have had several attempts to answer your question, Matthew, but haven't been able to articulate succinctly enough.

Just, however, been over to Iain Dale's blog and found this, from PJ O'Rourke in the Weekly Standard, which is spot on.

'Conservatives should never say to voters, "We can lower your taxes." Conservatives should say to voters, "You can raise spending. You, the electorate, can, if you choose, have an infinite number of elaborate and expensive government programs. But we, the government, will have to pay for those programs. We have three ways to pay.

"We can inflate the currency, destroying your ability to plan for the future, wrecking the nation's culture of thrift and common sense, and giving free rein to scallywags to borrow money for worthless scams and pay it back 10 cents on the dollar.

"We can raise taxes. If the taxes are levied across the board, money will be taken from everyone's pocket, the economy will stagnate, and the poorest and least advantaged will be harmed the most. If the taxes are levied only on the wealthy, money will be taken from wealthy people's pockets, hampering their capacity to make loans and investments, the economy will stagnate, and the poorest and the least advantaged will be harmed the most.

"And we can borrow, building up a massive national debt. This will cause all of the above things to happen plus it will fund Red Chinese nuclear submarines that will be popping up in San Francisco Bay to get some decent Szechwan take-out."

Yes, this would make for longer and less pithy stump speeches. But we'd be showing ourselves to be men and women of principle. It might cost us, short-term. We might get knocked down for not whoring after bioenergy votes in the Iowa caucuses. But at least we wouldn't land on our scruples. And we could get up again with dignity intact, dust ourselves off, and take another punch at the liberal bully-boys who want to snatch the citizenry's freedom and tuck that freedom, like a trophy feather, into the hatbands of their greasy political bowlers.'

Tories need to hunker down around some core principles of sound money,and explain them clearly and repeatedly to the public.

Hysteria

@ Skooch (?!) and Verity - yup!

RODEST

Matthew; with respect to the above posts I will try my simplistic opinion to answer your question on two issues, financial and political.

David Cameron said today that when politicians say they will cut taxes the electorate won't beleive them. I think the point here was where does the money come from to fund tax cuts in the presnt economic climate.

The measures that Cameron has announced may be eye catching if they were in power and could implement them in a short space of time. By the time the Tories get into power the cost of these measure could be three to four times higher.

The dilema the Tories face is how they can help families who are hardest hit as well as helping small businesses at a time when the economy will inevitably be in a worse state than it is now by Browns borrow and spend policy.

Politically, Tory risk their policies being undervalued by Browns spending and a weaker economy and there is also the risk that labour will do as they have done in the past and implement Tory policies if they are a winner with the voters.

I think the message that cameron has to hammer home is that there will be a tough time ahead whoever the next government is because of the mounting debt being accumulated by Labour. I think Cameron should make a point of asking Brown to announce the level of debt at each PM question time until the next election. Coming from Brown the electorate would have some idea of what lies ahead. On the other hand could we beleive Brown.