Nick Longworth is a Wandsworth Councillor and was the Conservative
parliamentary candidate for Twickenham in 2001. He was a news programme
editor for Channel 4’s Business Daily and BBC World before becoming
Head of Broadcasting at Central Office under IDS and is a co-founder of
the London-based consultancy, Media Intelligence Partners.
Has David Cameron ruled out tax cuts or hasn’t he? Has he flipped? Or has he flopped? He says he wants to “share the proceeds of growth” between increased public spending and tax cuts. His Shadow Chancellor, George Osborne, says he will put stability before tax cuts. Clear?
The lack of clarity has created a good deal of heated debate across the Conservative family, particularly on ConservativeHome, with some commentators – you know who you are – painting Cameron as the lefty, high-tax, closet liberal cuckoo in the Thatcherite Tory nest. They believe the words mean that the Conservative leader has turned his back on tax cuts and on the legacy of 1979.
Others, on the pragmatic “promise the public anything so long as they vote for us” wing, see the opacity of the language as crucial. They believe the public equates tax cuts with public service cuts and urge Cameron to modernise conservative language to shed the nasty image that has held the party back. This group believes Cameron is a closet tax cutter who will shy away from such dangerous talk in the run up to elections, but will cut taxes in power.
There is a third group who believe Cameron has left himself room to manoeuvre and will bring forward a tame set of tax cuts in the election manifesto, but should badge them as “tax relief” or “giving us back our own money”.
The debate apparently boils down to…
Has DC ruled out tax cuts and conceded the tax and spending debate to New Labour, is he a shy tax cutter who is hiding his Thatcherite light under a bushel, or is he Michael Howard with a nice face and nicer language who will promise nice tax cuts?
The one possibility that appears not to have occurred to many people is that Dave and George are not stupid.
As “Conservatives through and through”, they know instinctively and intellectually that lower taxes stimulate growth and are desperately needed in an economy that is tumbling down the world competitiveness league table. They also well aware that, as we head towards 45% of GDP being spent by the state, the scale of waste is “cosmic” as Dr Lee Rotherham described it in his Platform piece.
As politicians, they know the polling evidence suggests people do not believe politicians will cut taxes, whatever they promise.
As economic realists, they also know that, whatever their desires, they will be inheriting an economy with little room for painless, instant tax cutting when they take over in 2009/10.
Their conclusion, therefore, will be; we must cut taxes, but it’s not a vote winner; our priority must be to cut government waste, and concentrate our tax-cutting fire where it will do most good for the economy.
However black many conservatives like to paint the British economy, it remains pretty robust. There is no prospect of recession, despite high energy prices, and most people feel comfortably off, if not in clover. If they are honest, conservatives will accept that 2006 is not 1979, when the economy was truly in a state of collapse and the electorate were crying out for an alternative economic approach.
Sensibly, therefore, Cameron is letting John Redwood loose on cutting government waste rather than tax cuts, reducing the prospects to background noise. But the issue of tax cuts won’t go away if Cameron wants to convince economic commentators and businesses that he understands what UK plc needs.
Therefore, watch out for a shift to discussing corporate taxes, once the dust of Cameron’s ‘I am the change’ honeymoon whirlwind has settled. Most conservatives would agree that, if you want to stimulate economic growth, cutting business taxes is the number one priority.
If I am right, Cameron will go into the election not promising tax cuts, as far as the average voter is concerned. To her, tax cuts are about income tax or council tax, maybe even VAT or petrol tax, but they are not about business tax cuts.
Conservative critics of Cameron need to accept that the voters will not believe the promise of tax cuts. They aren’t interested in policies, they are interested in results. So, tax cutting promises will not deliver sufficient extra votes, while gaining a reputation for pursuing stability and income growth might. If Cameron concentrates on goals rather than policies, he can win, and he will have been right to ignore the siren voices calling for instant tax cuts.
I believe Cameron and Osborne are not stupid and therefore I predict that the first budget of a Cameron administration will bring cuts in corporate tax rates, and simplification of tax rules, and no reductions in income tax.