A couple of weeks I asked the question: ‘The Conservatives are accused of being fiscally reckless and fiscally over-cautious. Which is it?’ All told, the manifesto was a story of caution – even more so when considered in comparison to the Labour alternative, which has since been followed up by tens of billions more of wildly unfunded spending pledges.
Then again, lots of things seem normal when considered in comparison to Corbynism, and Tories tend to prefer absolute considerations to relative ones. While it’s hard to see Javid and Johnson’s fiscal plans as particularly OTT, it’s fair to say many fiscal conservatives were not madly keen on a general shift of balance from an emphasis on tax cuts and deficit reduction and at least some distance along the curve towards emphasising spending increases. The planned Corporation Tax cut was a victim of that change, having now been cancelled.
Today brought at least a little comfort to Tory tax-cutters, however. The emphasis of the Conservative campaign was on plans for a Brexit budget, to be presented within weeks should they secure a majority, which would include fulfilment of the pledge to raise the National Insurance threshold.
That’s welcome in itself, and will be an instant if modest boost to millions of workers who get to keep more of their own earnings.
It also sends two signals which shouldn’t be ignored. In longer term policy, a long-standing goal for many tax reformers is to bring simplification and greater transparency to the tax system by first aligning and then merging National Insurance and Income Tax. The current NI system is simply deceitful – there’s no real ‘insurance’, no pot of money saved up, it’s just a second Income Tax. That complexity has too often allowed Chancellors to boast of cutting Income Tax while gathering more NI on the sly through fiscal drag. It would be good to eliminate that route for stealth taxation in time.
In the more immediate term, today’s talk of tax cuts hopefully signals a forthcoming intense attack on Labour’s fiscal policies – including, as they do, large tax rises, and even larger spending and liability commitments which will inevitably translate into even more tax hikes.
With a week to go until polling day, it feels like there’s still a fair bit of room in the campaign to really emphasise what a Corbyn government would mean for the finances and futures of every household in the UK – and to shred the demonstrably untrue claim that (as a Momentum video falsely said this week) “under Labour’s plans 95 per cent of people won’t get tax rises at all”.
The evidence suggests this is fertile territory: Labour is betting the farm on the message that they will spend an almost unlimited amount, but voters don’t seem inclined to trust that their plans are realistic, feasible or affordable, and the prospect of financial irresponsibility is second only to Corbyn himself in the list of voters’ concerns about Labour. Compared to the massively costly tax implications of Corbyn’s plan, a swift but modest reduction in NI is both attractive and encouragingly responsible.