George Osborne will give a big speech on tax today, emphasising simplification. In order to boost his credentials with the Tory right he will say that his approach to tax is inspired by Adam Smith. Speaking to the IoD in Manchester the Shadow Chancellor will say that Smith’s ‘principles of good taxation’ – that taxes should be transparent, simple, efficient and fair – will guide his own approach to tax.
Mr Osborne believes that the complexity of Britain’s tax system is having a major negative impact on British competitiveness:
"In just nine years [Gordon Brown] has managed to double the size of the tax law bequeathed to him by all his predecessors since the Pitt the Younger. Take the Finance Bill currently passing through the House of Commons. It is 481 pages long – three times the length of Finance Bills in the 1980s. There are now enough tax inspectors in Britain to fill every seat in the Olympic Stadium in Berlin where the World Cup Final is going to be held – and you’d still have 30,000 waiting outside for tickets!"
Mr Osborne promises detailed work on a programme of tax simplification that will be ‘revenue neutral’ and which will reduce the cost of complexity that faces the taxpayer. Tax simplification is a key topic of Lord Forsyth’s Tax Commission, established by George Osborne last year before David Cameron, with his very cautious approach to tax relief, was elected leader. The Commission, which will report soon, was asked to look at flat taxation but Mr Osborne’s enthusiasm for flat taxation has since cooled considerably.
Speaking on this morning’s Today programme George Osborne said that talk of tax cuts might appear rash to those voters who most want to know that their mortgage payments will stay stable under the Tories.
In his speech Mr Osborne will warn that the effect of tax cuts would be unpredictable and
would be a "big gamble" with the stability of the economy (BBC). Supply-side Conservatives believe that the bigger gamble is to fail to begin to reverse Labour’s increase in UK tax levels to a historical high. UK tax levels recently outgrew Germany’s.
There remains speculation that the Tories may cut business taxation in amounts equal to increases in green taxation – as the Liberal Democrats (possible future coalition partners) have recently promised to do.