Mike Denham blogs for the TaxPayers’ Alliance
A happy Tax Freedom Day to one and all! We’ve finally paid off our wasteful incompetent Big Government for another year, and for a few months we’re free to spend our earnings as we choose (full details at the Adam Smith Institute). Unfortunately, TFD is getting later. It’s advanced by three days since last year, and it’s now later than at any time since 1988. Later even than in Germany.
Forty years ago we got our freedom at the end of April. Then Labour came to power and Wilson’s abysmal government shoved it forward at the jaw-dropping rate of five days a year. In fact, things got so bad that the Fab Four issued their famous list of just what the Taxman might hammer next. Depressingly, the passing years have proved them right on every single one, even – courtesy those un-indexed Inheritance Tax thresholds- the tax on death itself.
Overall, Blair’s government has pushed forward TFD by ten days. That’s restrained by Labour standards, but sadly there’s much more to come. Their own projections imply a further five days advance over the next couple of years, and beyond that looms a fiscal black hole which will need filling. Guess how.
Of course, we all expect Labour governments to increase taxes: it’s what they do. But traditionally, taxpayers have at least been able to rely on Conservative governments to put things right.
The concerning thing about the Cameron/Osborne fiscal agenda is that they no longer see that as a priority. George’s latest speech, while excellent in many respects, underlined that tax cuts come some way behind “stability”, and “strengthened public services”. Which is both horribly familiar, and utterly misguided.
Because tax cuts and stability are not an either/or. By the time of the next election, Labour will have increased our taxes by 4-5 % of GDP, and the historic evidence says that will reduce Britain’s trend growth rate by up to one-half per cent pa (good overview here). Indeed, with the new competition from low-tax China and India, it could be even worse. And lower growth means lower tax yields, higher social spending, and an even worse fiscal position.
So the status quo is not a recipe for stability. On the contrary, it actually has all the makings of yet another vicious circle, combining both lower growth and fiscal crises. Neither should we forget the other consequences of high taxation. Mr Brown likes to boast about how much he’s done to help the poor. Yet despite all his tinkering, his high tax regime has actually left the poor paying a higher share of their incomes in tax than the rest of us.
It’s a disgrace that for Britain’s poorest 10%, Tax Freedom Day comes not today, but the week after next. If we Conservatives really want to help the “most vulnerable members of society”, cutting taxes is one of the very best ways we can do it. Today the bells of tax freedom ring out across the land; let’s hope Dave and George heed the message.