Peter Hoskin

Osborne on tax

Osborne on tax
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Following William Hague's excellent speech there last week, George Osborne has today delivered an important address on tax reform at Policy Exchange.  The key component was a cogent defence of the Tories' current pledge to match Labour spending plans:

"Now the Labour Government have been forced by their own profligacy to adopt plans for the coming three years that halve the growth rate of government spending from 4% to 2.1%.

They too will be sharing the proceeds of growth. Not through choice but by necessity.

We do have a choice.

We can either: stick with our long term course; stick with the commitment I made to spending growth of 2.1% for the coming three years; review the final year when we know the state of the public finances; and understand that in an economic slowdown this will mean tight spending plans and difficult decisions about government priorities.

Or we can head off onto the margins of the political debate and reduce spending growth even further for the sake of a short term argument."

And Osborne also outlined some of the tax reform measures that the Tories would introduce (including the establishment of an Office of Tax Simplification).  However, those looking for an unmitigated tax-cutting agenda would have left largely disappointed.  On that front, I can understand Corin Taylor's ire, although I think the speech contained some encouraging remarks:

"I believe there is now a compelling case for a reduction in Britain's headline corporation tax rate.

In the age of globalisation, 28 per cent is too high...

...The next Conservative Government will raise the proportion of total tax revenues that come from environmental taxes - under Labour it has fallen from 9.7% to 7.3%.

But Gordon Brown has given green taxes a bad name by using them as stealth taxes. The doubling in Air Passenger Duty was a classic example - not only was it a badly designed environmental tax, but the increase was not offset by reductions elsewhere.

That is why I have pledged that any new environmental taxes that we propose will be replacement taxes not additional stealth taxes. Any additional revenues will go into an independently audited Family Fund that can only be used to reduce other taxes on families...

...I am clear that in a fiercely competitive global economy taxes should be lower.

I think the state consumes too much of the nation's income, and then spends too much of what it takes badly.

So as Chancellor I will approach each Budget looking to see if we can reduce taxes as well as reform them."

Even though it was all appended with this caveat:

"But nothing is more damaging to the reputation of politics than parties that promise to cut taxes and then end up increasing them. We remember Gordon Brown and Tony Blair promising 'no tax increases at all'.

So I will only reduce taxes if those reductions are lasting and sustainable."

In the end, it may one again reduce to a tortoise-hare debate.  Are Osborne's little hints enough, or should he more stridently make the case for a low tax economy?  Either way, it's certainly progress on the negative politics of a few weeks ago.

P.S. Conservative Home have some typically excellent coverage on all this: here are onetwothree pieces that you should get stuck into (the third, by Matthew Elliot, is especially worth reading).