Jonathan Isaby is Political Director of the TaxPayers’ Alliance
I suspect John Redwood was articulating the views of many ConHome readers when he said, in 1995: “The Conservative Party is a tax-cutting party or it is nothing”. It surely ought to be the basic aim of any right-thinking government to minimise the burden it imposes on taxpayers, on the basis that lower taxes increase personal freedom, giving people more power to spend their own money as they see fit for themselves and their families.
Lower taxes also promote entrepreneurship, helping to create jobs and the conditions for economic growth – something for which we are all crying out right now. There is a whole host of reasons – economic, moral and political – why cutting taxes is the right thing to do. Indeed, David Cameron still professes to share that view, declaring just last week in his speech at Davos: “I believe in low taxes”.
Yet I’m afraid to report that the record of the government he is leading suggests that this particular belief of his has not been effectively translated into policy. A new piece of research published today by the Taxpayers Alliance exposes the sad reality of the Coalition’s record on tax. We have scoured every Treasury and HMRC document, looking at how tax reliefs, allowances and rates have been amended since this Government came to office, as well as noting any new taxes that have been levied. And our key finding is stark: this Government has implemented or planned 299 separate tax rises but only 119 separate tax cuts.
This means that the Coalition has been responsible for 180 more tax rises than tax cuts since it came to power – raising tax more than twice as often as it has cut it. The result for taxpayers makes for further grim reading: in 2009-10, the last year of the previous Labour Government, £513 billion was paid in taxes (or £549 billion at 2012-13 prices). However, by 2015-16, the current Government plans to have increased that amount to a staggering £671 billion (£633 billion at 2012-13 prices), which equates to a real terms rise in the overall tax burden of 15 per cent. This is bad news for taxpayers and bad news for the country as a higher tax burden will make it all the harder for the economy to grow.
But the research also highlights another grave disappointment for those of us who would like to see simpler, stabler taxes: taken together, the rises and cuts already enacted account for a total of 363 separate changes to our labyrinthine tax code. Many of these changes will have created just as many new complications as they will have resolved – and such endless tinkering at the edges also creates uncertainty for those making long-term investments, which again has the capacity to undermine economic growth. The case for lasting, strategic tax reform, as set out in the final report of the 2020 Tax Commission is only getting stronger by the day.
P.S. A note on our methodology: you can read a full explanation in the report but, in summary, it should be noted that this research measures the number of tax raising or cutting measures in cash terms. It does not account for inflation, so freezes are not counted while adjustments to account for inflation are. But this method applies to reliefs as well as fixed tax rates so similarly affects both the number of tax rises and cuts. It also does not measure magnitude, just the number of individual tax cutting and tax raising measures.