In a well-received speech yesterday to the British Chambers of Commerce, George Osborne emphasised his campaign to save the Home Computing Initiative and the importance of a reduction in business taxation:
"As and when we move in the direction of lower taxes, I acknowledge that there is a strong argument for cutting business taxes first."
Mr Osborne also promised tax simplification and other supply-side reforms to tackle the "furring of the arteries". The preference for business tax cuts is an important statement of intent. Gordon Brown’s taxes are a major cause of Britain’s declining economic competitiveness and Mr Osborne may be calculating that lower business taxes can be more easily presented as economically responsible than cuts in personal taxation. The danger is that such a preference could be portrayed by Labour as proof that the Tories remain in the pockets of (big) business.
My guess is that George Osborne will offer tax relief at the next General Election – the lion’s share probably designed to spur economic growth. If the budget is tight by the time of the next election – which David Gauke MP warns may be sooner than we think – these targeted cuts could be made affordable by offsetting increases in green taxation. I certainly expect Team Cameron to prefer a Tory candidate for London Mayor who will support congestion charging. Such support will very possibly feed into a wider support for increased taxation of environmentally-harmful activities. The Gummer-Goldsmith policy group may, for example, recommend taxation of air travel (something already advocated by Tim Yeo). Such policies would be controversial but Mr Cameron is under pressure to move beyond "quick, easy and free" environmental posturing and demonstrate his seriousness about tackling pollution.
Such a combination of general cuts in business taxation and offseting increases in green taxation could be used by Team Cameron to simultaneously present the Tories as friendly to business and the environment.