By Harry Phibbs
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In the Sunday Times yesterday David Davis called for (£) a "psychologically inspiring budget." This morning in The Times he was rebuked by Lord Lamont who said (£):
Perhaps he needs to discover opera.
An amusing line, but Mr Davis is right and Lord Lamont is wrong. Even if we concede that substantial spending cuts are not possible (and I don't – they are not only possible but essential) there is also the question of cuts of those cuts in tax rates that would be likely to increase tax revenue. Here the response from Lord Lamont (and David Cameron and George Osborne) is a tiresome retreat into erecting a straw man.
Lord Lamont says:
Some Conservative backbenchers seem to believe that all tax cuts pay for
themselves through higher growth and increased revenues.
Names!
I don't know of any backbencher who has claimed that cutting any tax under any circumstances will increase revenue.
In making such a pretence that they have Lord Lamont dodges a convincing response to the evidence: That at this time of high taxation cutting particular tax rates probably would increase revenue.
One example would be cutting the top rate of income tax from 45p to 40p. That is not going to happen for political reasons – not because anyone seriously claims it would lead to a loss of revenue.
Very well. Let us accept not only the financial constraints but also the political ones.
What tax cuts could the Chancellor still deliver?
Which ones, albeit that some might be modest, but which would be "psychologically inspiring" while posing minimal risk to the public finances and doing little to antagonise the Lib Dems:
Those who argue against tax cuts must do better than being breezily dismissive about the potential for increased revenue. It is not convincing merely to have the generalised platitude that revenues will not be increased under all circumstances. Something more detailed is required. If there is credible evidence that a tax cut would help the public finances then there is a duty to take this seriously.
There would also be the psychological aspect which people such as Mr Davis and Boris Johnson are quite right to emphasise.