I’ve just listened to Radio 4’s World at One (Wato) and heard George Osborne’s emphatic insistence that the Conservative Party will promise no unfunded tax cuts at the next General Election. That concession amounts to a huge ideological victory for the political left. The Conservative Party’s Treasury spokesman has effectively abandoned any attempt to persuade voters of the dynamic or supply side benefits of lowering taxation. The promised reductions in business and family taxation will all be paid for by higher green taxation. Environmental economist Professor Stephen Smith told ‘Wato’ that it is unlikely that green taxation will yield much more than £2bn to £4bn in extra revenue without becoming very regressive. That leaves little room for any significant reductions in the tax burden on pressurised families.
The real question on tax is not whether we can afford to cut taxes (we can given the waste in the public sector, the supply side benefits of lower taxation and the possibilities for reducing the demand for government) but whether we can afford not to match competitor nations’ lower tax regimes. Lord Forsyth has just told Wato that his Commission’s £21bn tax relief package only reverses one year of Gordon Brown’s tax rises. The Taxpayers’ Alliance says "if all the report’s proposals were implemented tomorrow, the tax burden would still be higher than in 2003".
Mr Osborne’s decision to rapidly distance the party from the Commission’s recommendations also raises questions about the Tory leadership’s willingness to embrace equally serious recommendations from the other policy groups. What is the point of appointing these commissions if their results are so quickly disowned?
>>> For a more positive view of Tory tax policy see Watlington on the SAU blog.