Over the last few years Brown has presided over a massive growth in the size of the state. The low tax economy built by Margaret Thatcher and John Major is being undone. Britain plc is becoming less competitive. Parts of our nation are being ‘Soviet-ised’ as Labour ‘buys votes’ in its heartlands. Waste in the public sector is well-documented. And are taxpayers getting value for money from the extra 100-and-more taxes that have been levied? The question answers itself. Gordon Brown has been on a spending binge and it’s time for some sobriety.
Graeme Leach, Chief Economist of the Institute of Directors, agrees that there is a major problem:
"In the absence of war or recession the public spending build-up since 2000 has been unprecedented. No political party is facing up to the need to restrain public spending as much as is needed. The IoD has called for public spending growth to be kept to 1.5 per cent per annum not just for the next CSR but the following one as well. If we’re to reverse the wasteful build-up over the past decade tough decisions will have to be made. Without them high tax and spend will progressively undermine our competitiveness."
Last September George Osborne signed up to Labour’s spending plans until 2010/11. That decision is unpopular amongst Tory members. Our monthly polling of the Conservative grassroots shows that they oppose the pledge by 64% to 24%. It’s vital that Mr Osborne’s pledge is not renewed as we get closer to a 2009 or 2010 General Election. George Osborne needs to allow himself more room to cut borrowing and/ or introduce economy-reviving tax relief. As it stands the Shadow Chancellor has left himself with fewer and fewer options. See the graphic below:
"It was always wrong for the Conservatives to commit to matching the Government’s spending plans. With an economic slowdown on the way, increasing spending at 2% could mean higher taxes, the worst possible thing to do in a recession. It shouldn’t be beyond the wit of the Shadow Treasury team to find savings, reduce unnecessary government functions and so create room for much needed relief for overtaxed families and businesses."
ConservativeHome believes that spending growth of 1.5% is almost certainly enough. That is the IoD’s preferred level of growth. That would give a Conservative Chancellor almost £3bn extra each year to deploy. That could be used to reduce borrowing. It could be used for economy-boosting tax relief – tax relief that will partly, if not wholly, pay for itself. £3bn for example would almost pay for 2p off Corporation tax. Alternatively it would nearly pay for a penny off income tax. Less economically useful but more politically potent, it could be used to buy some relief for council taxpayers. Council tax is now Britain’s most hated tax.
David Cameron promised to share the proceeds of growth. There is a real danger that the already bloated state will gobble up all of any proceeds if the Tories insist on continuing Labour’s spending splurge and do not take strong action to increase economic competitiveness.
We give the final word to Michael Fallon MP, a Tory member of the Treasury Select Committee:
"George Osborne showed how we can win the battle on tax. Lower public spending growth is the other key to cutting Labour’s borrowing, and putting the public finances back in order. We cannot keep spending more than we can afford to borrow."
As with all of the ten campaign themes that make up ConservativeHome’s Agenda2008, we’ll be providing monthly updates on this need for a Conservative government to deliver more responsible growth in public spending. Two other Agenda2008 items have already been launched: (1) A campaign for fairer-sized seats and (2) A media policy that encourages more diversity.