Two of the stories on the front page of today’s Sunday Telegraph illustrate what is set to be an increasingly heated debate within the Conservative Party.

The splash covers the “inheritance tax time bomb” ticking under growing numbers of families as house prices rise, taking them into the scope of the Death Tax.

Further down the page is America’s decision to send an aircraft carrier to the Gulf in response to the advance of ISIS in Iraq.

The former story, backed by an editorial in the paper, hints at the coming push to establish new red lines for the Coalition negotiations which may well come about in 2015. Inheritance tax is a wicked policy – punishing those who exhibit the very best instincts by leaving their children as well provided for as possible when they are gone. Many Conservatives – me included – bitterly regret that the promise to vastly increase the threshold was ditched at the Lib Dems’ behest.

The latter story is a taste of an increasingly insecure international environment, which is sure to spark its own push to establish a red line on defence spending. With Putin’s troops advancing in Eastern Europe, and an international Sunni-Shia conflict intensifying in the Middle East, there’s a good case to be made not only that defence cuts should cease, but spending on the Armed Forces should increase. Who knows what dangers islamist extremism or Russian expansionism may bring in the next few years?

Tax hawks and defence hawks will take up their respective positions – some who fall into both camps will no doubt take up both positions. But those who do so forget the other huge issue at hand – despite all the progress made by George Osborne, we still carry the burden of a deficit of more than £100 billion.

Faced with the immorality of inheritance tax (a growing problem given rising house prices), and the clear threat of Russian aggression (suggesting we would be wise to move our German bases to Poland and the Baltics, rather than simply shut them), and the unknowable risks arising from the vicious events in Syria and Iraq, where will the money come from to deal with even one, never mind all, of the issues at hand?

Cuts to the armed forces could be prevented, or at least mitigated, by finding bigger savings elsewhere – be it from wasteful projects within the MoD or from other departments (like DfID, for example). If that is done, then it’s hard to see how we could also go into the General Election offering a large flurry of tax cuts.

Few people are more enthusiastic about tax cutting than me. Doing so is morally right, economically wise and politically popular. However, the mission of this government, and the next, is meant to be solving the mess we inherited in 2010 – not reducing it, solving it. That means eliminating the deficit and installing a system of permanently balanced books – anything less is a guaranteed way to return to high taxes and the debt mountain.

It’s difficult to say, but it’s true. In an age of vast deficits, we should prioritise tax cuts that will be the most affordable, or which will even raise more revenue through lower rates – like reforming Stamp Duty, for example. In an age of vast deficits and growing security threats, that is doubly true.

We should always be wary of the usual suspects lobbying to protect defence spending – the arms industry itself, as well as those who measure their patriotism purely by the size of the defence budget, have long made poor arguments to keep the MoD’s budget high. For that reason we should always closely scrutinise defence commissioning, in particular, where cosy deals and incompetent management have regularly cost the taxpayer billions.

However, when there are clear, genuine dangers we would be foolish not to ensure we are well-protected. We must squeeze better value for money from the MoD and its contractors as much as possible, but Britain still needs soldiers, planes and ships to safely navigate the coming years.

This will not be an easy debate for us to have – but it is upon us whether we like it or not.

Ask a Conservative if they want strong defence, they’ll say yes. Ask them if they want tax cuts, they’ll say yes. Ask them if they want balanced books, they’ll say yes. Ask them which of the three they want, and the answer may not come so quickly.

65 comments for: Tax cuts versus defence versus austerity – Conservatism’s conflicting priorities

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