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On ConservativeHome yesterday Michael Fallon MP issued a warning against taxing non-doms.  He’s written another superb article today; for The Daily Telegraph.

The first half of the piece is stuffed with hard-hitting facts:

  • "Four years ago, the 2003 Budget forecast that net public borrowing would be £22 billion in 2007-08. In fact, it’s now planned to be £38 billion – 72 per cent higher."
  • "Each year we were promised that the Budget would be brought back into surplus: in 2003, Gordon Brown forecast surplus by 2006; in 2004, that slipped to 2007; in Budget 2006, it became 2008; by last autumn that had moved out again to 2010."
  • "Back in 2003, Mr Brown planned total public sector debt to reach £472 billion by this March. In fact, it has already risen to £541 billion: that’s 15 per cent or £69 billion higher. In five years’ time, it is planned to hit £713 billion, well over double what it was in 2002-03."
  • "Debt interest is now our fourth biggest departmental spending programme: it’s almost exactly as much as the entire defence budget (£32 billion)."

Mr Fallon then links this deterioration in the public finances to the tax burden that is facing the British people and businesses:

  • "A single man on the minimum wage earns around £11,482 a year, but pays £1,722 in tax and NI – almost 16 per cent of gross earnings. (He receives just £2 a week in working tax credit.)  If he lived in Ireland, he would have to earn twice as much before he paid the same amount of tax. In fact, somebody on the average Irish annual wage of 30,000 euros (£22,500) has a tax burden of only 14.8 per cent."
  • "In 20 years as an MP, I have never known so many constituents finding themselves in real difficulty this winter making those last council tax payments."
  • "[Small businesses are] paying more corporation tax, not less. Over the past 10 years, they have been paying more and more to the Government for doing more of the Government’s work for it: operating tax credits, checking immigrant status, sorting out graduate loan repayments."

In order to begin to get control of this situation Michael Fallon draws the conclusion that is obvious to 77% of Tory members but not, it appears, to Messrs Cameron, Osborne and Hammond: A Conservative government must reduce the growth in the size of the state:

"The public finances are in crisis. We need not just a formula, but some principles. We need, too, to be honest with people. The growth of our state is now simply unsustainable.  Because we have yet properly to address the spending side, we feel constrained to match any sensible tax cut proposal with a compensatory tax increase elsewhere. Lower taxes for families will be paid for by higher taxes on polluters, raising inheritance tax thresholds financed by taxing the non-doms.  But every time we match a commitment to a tax cut with a commitment that we will increase another tax to pay for it, we undermine the moral case for low taxation.  We give no hope to those people at the bottom of the heap – the worker in his first job at the minimum wage, the pensioner on a fixed income – that we understand the pressures on them and that we are determined to help them.  Restoring our public finances will not be easy. It wasn’t when we returned to power in 1979. But we began by being on somebody’s side."

David Cameron’s commitment to share the proceeds of growth is a good one but current Tory plans would see the state gobble all or nearly all of the nation’s growth.  We need to reduce the rate of growth so that we can reduce borrowing and introduce economy-boosting tax relief.  John Redwood has put forward a ten point plan for slimming Labour’s bloated state.   A freeze on civil service and quango recruitment would be the right place to start.

64 comments for: Michael Fallon challenges George Osborne to cut the “unsustainable” growth in the size of the state

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