Yesterday’s speech by George Osborne (still not on conservatives.com at the time of posting) was meant to produce clarity on tax. It failed to do so.
The Daily Mail has complained about the muddled briefing of the speech (see graphic on right) but still thinks that the Tories are committed to reductions in the tax burden (hence the headline above). The Daily Telegraph, meanwhile, has published a leader that is heavily critical of the Tory reluctance to be more specific about its intentions on tax:
"Mr Osborne pointed out that tax freedom day – the day when people stop working for the taxman and start working for themselves – this year falls tomorrow. Two years ago, it fell a week earlier. Such a shift of resources to the unproductive sectors of our economy will strangle growth. The Tories seem happy to avoid the tax cuts that would help avert that catastrophe, because they wish to avoid the spending cuts demanded by prudence and fiscal responsibility."
The thing that is causing frustration at The Telegraph is that, again and again, George Osborne is correctly diagnosing the problem. He understands that Britain has the highest tax burden in its history and that the "economic arteries are furring up". "The Conservatives have identified the problem," concedes The Telegraph but appear afraid to enact the tax incentives that are necessary for Britain to compete in the global economy. George Osborne thinks that tax simplification will help Britain compete and he is surely right but will it be enough?
Mr Osborne is reluctant to offer tax reductions because he doesn’t think that the electorate will believe such promises. He criticised those who "think the key to winning general elections is to make up-front promises of tax cuts" and stated "we have fought the last three [elections] on that promise and lost all three of them". Both those two statements are misleading. Few advocates of tax relief believe that they are the "key" to winning an election but those of us who are concerned about the declining competitiveness of the British economy, believe that tax relief can be sold to voters as part of a package of measures to protect growth and employment. The second statement is more annoying. We did not lose any of the last three elections because of our policy on tax. The primary reasons Labour have won parliamentary majorities were Tory exhaustion and sleaze (1997), voters giving Labour the benefit of the doubt (2001) and Tories offering an unbalanced all-core-vote message (2005).
Goeorge Osborne has now boxed himself into a corner on tax and we cannot expect him to now offer the radical programme of tax relief that the British economy needs. It is for the wider conservative movement – campaigning organisations such as The Taxpayers’ Alliance and thoughtleaders like Reform – to build long-term public support for a smaller, less wasteful state. The only thing we could ask of George Osborne is to drop the economic illiteracy that tax relief and stability are somehow in opposition. There are certain circumstances when tax cuts might unsettle the markets but if David Cameron inherits a sluggish economy from a Prime Minister Gordon Brown, a lower tax burden – particularly on the country’s wealth creating sectors – will be essential for economic health and stability.