Alex Massie

Let’s Talk About Tax

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We know that europe and perhaps electoral reform will be difficult for the Tories and Lib Dems to agree upon. So let's talk about something else: tax.

Cameron's email to Tory members today strikes just the right tone and says most of the right things. It makes it clear that he thinks there's a deal to be done and, importantly, reminds the membership that the Tories will have to give some things up too if the partnership is to be stable enough to last at least two years. That's important because it's one way of building trust and convincing the other party that you're serious.

So, on tax, I'd suggest this as one potential way forward:

1. The Tories should make it clear that they are postponing their planned changes to inheritance tax*. Since the public assumes the Tories are wedded to these changes, giving them up would demonstrate a certain seriousness.** It would also allow Cameron to make the case that the national interest demands that all parties make sacrifices and so on. When the economy recovers and when the deficit is on the road to being brought under control the matter can be revisisted. But it is not an immediate priority.

2. The Tories will keep their plans for National Insurance discounts for small and new businesses but they'll swallow Labour's 1% NI rise. Yes, this breaks a campaign promise but I'm not sure the Tories really think this NI increase a tax on jobs. Certainly Conservative governments have been happy to increase NI themselves in the past. A decent compromise, however, might be to delay the increase by a year.

3. Some of this can be offset by modifying the Liberal Democrats' proposal to raise the personal allowance to £10,000. That too should remain something to which both parties agree to aspire but, again, in the current climate it's not affordable. However, as a demonstration of willing and intent George Osborne could announce that he's raising the income tax threshold from the current £6,475 to £8,000.

Now it's true that, conveniently, I think this package might be better policy than what was in the Conservative manifesto anyway but that's not really the point.

Cameron has been good so far and he's been right to say that a stable government is in the national interest given the fiscal predicament the country is in. The statesmanlike thing to do is to level with the country - and his party - about this and produce a Programme for Government that makes it clear that everyone must pull their weight and make some compromises until the finances improve. Where matters can be eased, however, they should be eased to benefit of all, not just a few.

And, again, a coalition government makes dealing with the deficit and the national debt easier than might be the case if the Tories end up running a minority ministry. A minority government might not be disastrous but it should, I think, be very much the second choice.

Again, none of this - and it's just one of many examples of how one could present matters and sell them to the public - needs be set in stone and Tory manifesto promises in this area need not be jettisoned entirely; only delayed.

This could, if done properly, encourage the electorate that the parties are willing to take a measured, flexible approach to these affairs that puts the country before party. True believers might not like it, but most voters aren't true believers.

*I know the Tory grass-roots loved Osborn'e Inheritance Tax gambit and that in Westminster it's seen as a masterstroke. But, in the end, I suspect it hurt the Tories just as much as it helped them. Sure, in some places it will have helped but many of the people with aspirations towards being in that kind of tax bracket and situation would have voted Tory anyway. Couples whose wealth doesn't come close to £650,000 might think differently.

Anyway, that their flagship tax policy self-evidently only benefits the rich (and, potentially, those who hope to be rich) made it easier to persuade voters that, despite everything, the Tories really hadn't changed. It's not great when one of your own policies can so easily be understood as undercutting the central message and narrative you're trying to sell. Especially after the financial crash.

**To the public, that is. As TB reminds me in the comments, the changes aren't coming in immediately anyway. I'd forgotten that and suspect most voters have too.

Written byAlex Massie

Alex Massie is Scotland Editor of The Spectator. He also writes a column for The Times and is a regular contributor to the Scottish Daily Mail, The Scotsman and other publications.

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