Danny Finkelstein argues that I am not “precise” when I say that the Tories have been equating tax cuts to instability – and, as ever, he’s right. This is, happily, a historical argument as the Cameron project has evolved substantially since the first weeks when this “stability before tax cuts” slogan was implied. One does not hear it now, nor does one hear “sharing the proceeds of growth”. But to plot the right course for future, the mistakes of the past need to be identified. I believe “stability before tax cuts” to be one of those mistakes, and here’s why.
Political slogans are designed have two meanings: what they precisely mean, and what they practically convey. The latter is the more important. The Tory slogan “stability before tax cuts” clearly implies a tension between the two. Otherwise, why would one have to choose? I remember at the time discussing this with baffled senior Tories, who could not work out what on earth Osborne meant. Didn’t he think stability was threatened by Brown’s high taxes?.
The precise meaning was more nuanced, as As Danny says:
“What the Tories said was that there might be moments when tax cuts would endanger stability and that if they found themselves at such a moment they would put stablity first.”
Being a slogan it was, of course, mostly used without any such explanation. But Danny is right in saying this was how Osborne introduced the slogan in Jan06. He argued that his top priority would be paying off the debt (“stability”) and tax cuts were from now on regarded as a luxury, which would come after. Letwin had a five-step argument to explain the slogan:
1) Tax cuts would have to be debt-financed, because one could not possibly imagine cutting Mr Brown’s “investment”.
2) So those Tories calling for tax cuts actually wanted to increase debt.
3) In fact, what the Tory Enemy Within really wanted was “unfunded tax cuts.” This phrase entered the Cameronian argot, and is used to this day. Even though no one – MP or journalist – was calling for this.
4) Unfunded tax cuts would radically increase the national debt, which would lead to far higher interest rates and a falling pound.
5) Falling pound means higher inflation, ergo instability. So tax cuts mean – or there “might be moments where they mean” – instability.
Now, Letwin was right on the link between deficit and instability. But utterly wrong to argue that tax cuts would always mean a deficit. They could be paid for by cutting some of Brown’s wasteful spending – but they might also pay for themselves. Ask Ireland. It boosted its corporation tax receipts by cutting the rate of corporation tax. As more growth was stimulated, the Irish Treasury collected the wonga.
All the above is, in a way, besides the point because “stability before tax cuts” was not about economics. It was about politics, and about establishing a “Cameroons v the Nasty Party” narrative. Rather than fight Brown’s cariacture about the evil Tories, the Cameroons accepted it and said “you’re right, they were evil. But we have slayed them! ” So the slogan’s main aim was to trigger headlines like “Right Wing Tories Upset by Cameron’s Tax Policy”. Nowadays, Osborne likes to make out that there was some battle royal in Bournemouth 2006, where he “educated the party” about tax cuts, and slayed the dragon. As anyone who was at Bournemouth can tell you, this is nonsense. The Cameroons wanted a Clause IV moment, but they had no one to fight. They were worshipped by party members because of the first opinion poll lead for 15 years.
One can argue that, politically, the “stability before tax cuts” strategy was a great success as it detoxified the Tory brand and allowed the party to be used as a recepticle of protest votes. This “Cameroons v the Nasty Party” narrative was largely bought by the media, and is responsiible for today’s opinion poll lead. So as a marketing tool: result! As an economics tool, this slogan was always dodgy. And it deserves no place in Tory thinking today.
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