Peter Hoskin

Tories & tax cuts

Tories & tax cuts
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With Philip Hammond suggesting that the Conservatives won’t cut taxes until a second term in government, there’s a lot of great reading material on the Tory tax debate in today’s papers and across the political blogosphere.

The Telegraph’s Janet Daley is among the commentators who want the Tories to be bolder on tax.  Here are some key passages from her article today:

“Mr Osborne had committed the party, as it were, to being uncommitted on the question of tax cuts: there would be no promises now of "upfront, unfunded" tax reductions, just a cautious wait-and-see-if-we-can-afford-it-at-the-time approach.

Reducing the tax burden was, of course, an "aspiration" but it was an open question whether the economic growth which was to be "shared" between public spending and tax reductions would be sufficient to allow for the latter (since the party had already undertaken to match the former at Labour levels).

Never mind that the economic logic of this argument was bizarre: tax cuts stimulate growth in the economy. To say that you will have to wait for the growth before you can reduce taxes is like saying that you will only be able to afford the fertiliser after you have harvested the crops.

But the whole Tory philosophy seemed to be about not frightening anybody or giving Labour any pretext for shrieking "same old Tories". Now, however, we have apparently moved on from this odd position.

Mr Hammond, a man who seems not to understand the meaning of the word hubris, has given us an insight into what appears to be a far more definitive long-term project: there is no question of any tax cuts in the party's "first term", which will be all about making the savings (while not making any cuts in public spending, remember) that would make cutting tax theoretically possible.

Only then, in the confidently predicted second term, would there be scope for reducing tax. So presumably those undertakings Mr Osborne seemed to be giving about inheritance tax at last year's spectacularly successful party conference are null and void...

...At a stroke, this policy disfranchises that entire tranche of the population who are looking desperately not just for some relief from the financial burden of direct and indirect taxation but also for a glimmering of sympathetic understanding from at least one political party...

...Promising to match the Government's current spending levels is to underwrite a policy that manifestly does not work. It is also effectively to dismantle any meaningful critique of ministers. A Tory spokesman who attempts to criticise the Brown spending spree can be flattened with the perfectly sound observation that his party is proposing to do exactly the same.”

Whilst – in a post at Comment Central – Daniel Finkelstein speaks out against the clamour for immediate cuts:

“Margaret Thatcher's Governments cut the marginal rate of income tax, not tax bills. She was a tax reformer, not as tax cutter.

Why? Because achieving lower taxes is a hard grind and requires a serious long term programme of structural reform. The Thatcher Governments were doing other things - freeing markets for instance.

Much of the tax cutting debate on the right is, I am afraid, a combination of wishful thinking, historical revisionism and immaturity.”