Labour’s unfunded tax cuts?

Over the Brown years the Chancellor/PM has applied an iron law to the Opposition – they must speak no tax cuts and no spending increases. If they venture either Labour reserves the right to list the worst kind of spending cuts to “pay” for them, as no “unfunded” spending increases and tax cuts are allowed.

Gordon Brown has ignored this rule himself, increasing spending massively (often on the wrong things) by increasing borrowing. He has from time to time tried to pay for the increased spending through tax increases, but these are usually unpopular and recently have derailed him This has led to a series of spectacular partial reversals of budget policy (10 p compensation package, cancellation of prospective fuel duty increase, review of VED increase, partial climbdown on CGT etc).

Today we learn of the final irony – he is considering, according to the briefing, a package of unfunded tax reductions!

As if we needed more government debt. Government debt is simply taxation deferred, where we the taxpayers not only have to repay the debt with taxes, but have to pay interest on it as well.
It can make sense for governments to borrow during a downswing or period of slow growth, but isn’t this government already doing that to excess thanks to their mismanagement of the economy and the cycle?

If Gordon at the eleventh hour is looking for some tax cuts they should at least be funded out of reductions in much hated spending, like all the spending on regional government in England, the ID cards computer and the apparatus of his surveillance society.

Meanwhile, the Conservatives will wisely stick to Prudence, and prepare themselves for the shock of just how bad the budget deficit is going to be by this time next year. Does no-one in government care at all about the surge in government borrowing? Do they think the markets will just let them get on with it, without extracting a price?

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10 Comments

  1. Brian Tomkinson
    Posted July 30, 2008 at 10:11 am | Permalink

    Don’t forget the ten years of stealth taxes under this dreadful man!

    • Jon Carter
      Posted July 30, 2008 at 1:56 pm | Permalink

      Brian,

      Which "dreadful man" are you talking about, and exactly which "stealth taxes"?

  2. Stewart Knight
    Posted July 30, 2008 at 10:38 am | Permalink

    Simple and to the point where the normal man in the street can understand the hypothesis being offered.

    So why doesn't Cameron explain the situation exactly like this and negate all the charges from Liebour?

    I sometimes despair of the Tory party getting away from Liebour style statistic fights and manipulation and start winning the arguments by simply telling it like it is to cater to the whole vast swathe of voters who just want to hear the truth. Most of us can understand well, but few are interested enough to make a difference.

    Couldn't you persuade Cameron to start being more succinct?

  3. Neil Craig
    Posted July 30, 2008 at 12:36 pm | Permalink

    There would be a good case for unfunded reductions in corporation tax since this money all goes to supporting investment & economic growth. This would be a gamble but even a small increase in growth would increase revenues to match it. There is no economic case for focussing cuts on feel good tax reductions.

    The hypocrisy of such actions after attacking Tories for lesser crimes against prudence is obvious but it is up to them to point this out. Instead they have tended to go along with Gordo's programme promising to maintain his spending commitments & agreeing how well the economy has done because we are growing faster than the old EU countries withput mentioning how badly, at 2.5% our economy was underperforming the world average of 5%.

  4. mikestallard
    Posted July 30, 2008 at 6:53 pm | Permalink

    Our National Debt according to EU is = £63,690,000 =3.3% of GDP @£1,930,000,000. The EU is not happy about this and wants it down to sort of around 2%. But – Hey! – some of Europe is even worse! So who cares?
    I do not understand figures – especially government figures – any more. So I strongly expect that, once all the little left-outs – Northern Rock for instance – are slipped back in when the Labour Party leaves office, that things will be revealed as simply dire.
    I just hope that the Conservatives have the strength of will that Mrs Thatcher had.

    • Henry Schnarr
      Posted July 31, 2008 at 10:12 pm | Permalink

      In May 1997, when Gordon Brown had his first meeting with his Treasury officials, it is reported that they told him that Ken Clarke had left the economy in much better shape than they had anticipated – to which Gordon Brown is alleged to have said, "What do you want me to do? Congratulate him?"

      Well, when George Osbourne takes over as Chancellor, he can rest assured that he won't have that luxury. His work will be cut out for him and it won't be easy! I reckon that we will have to have at the very least two years of considerable austerity, just to achieve stability.

  5. Alastair Stewart
    Posted July 30, 2008 at 8:37 pm | Permalink

    It isn't difficult to foresee Labour (further?) developing a complete indifference to the consequences, especially financial, of their actions. This in the expectation that they won't be the ones who have to pick up the pieces, as the chances of losing power increase. Before the last GE we saw Rover receiving a huge and pointless handout. Expect electoral bribes prior to the next GE to be funded from fresh borrowing.

    It would be fascinating to see a national balance sheet at the GE of all govt creditors and debtors, including all those hidden PFI debts, with restated comparison figures back to 1997. 'Simply dire' probably won't even begin to describe it.

    Reply: My estimate of debts and unfunded liabilities is £1500 billion.

  6. Adrian Peirson
    Posted July 31, 2008 at 2:45 am | Permalink

    We must pay back not only the debt but the interest as well.
    I ask again, Why doesn't Govt Mint the money it requires rather than borrow it.
    That way we dont pay interest on it.
    If the National Debt is £1.3 Trillion Dollars, what is the Interest alone on this !!!!
    We would be saving this amount of Interest per year

    This is the real reason why costs are rising, there are no oil shortages and there are no new food shortages, what is happening is that in order to repay these debts ( Gilts & Govt Bonds / Securities ), the Govt is Borrowing more money.
    The Instant it is Borrowed, it is devalued because of the attached interest charge.
    Prices are not going up, the Value of our fiat Money is going down.

    This happens to all fiat money systems.

    It happened in Germany in the 20's 30's

    The same people are responsible, except now the Bankers responsible are not just in Germany and Russia, they are Global.

    What is happening, is deliberate.

    I don't rate Browns intelligence either but he must be in on this scam which is the western banking system, a system designed purely to hoover the wealth of Nations into the Vaults of the Global Elite.

    And Labour call themselves Socisalists, now you see the real intent behind socialism / communism to eradicate private property, like all socialist communist states, it is about total dominance and rule over the masses.
    Communism, is and always was about Greed, Power and Despotic control.
    Many of their activists have believed the lies and spin about issues such as taxation is about redistribution, but as the Global Communist endgame plays out, its true nature will become obvious to all.
    Collapse the worlds economies and hundreds of million lose their homes and become enslsaved by the real 'state', the Global Elite, the International Bankers.

    Reply: If a government prints too much money it just causes inflation so we are all worse off

  7. Matthew Reynolds
    Posted July 31, 2008 at 7:54 pm | Permalink

    The Tories must pledge to halve public spending on QUANGO’s & consultants while cutting the state sector payroll by at least 50% of what Labour increased it by . The aim should be to slash public spending growth to 0.5% p/a in real terms until the PSBR has been wiped out . Big government means more taxes now and more taxes for future generations in the form of a high PSBR and that paves the way for Euro-land style decline . As someone on just over £12,000 p/a I want ‘ Tory Cuts ‘ if it means a basic personal allowance of say £12,000 ! Why not redistribute money towards the working poor away from Labour waste ? Sounds like modern compassionate conservatism furthering the cause of social justice to me…..

  8. Matthew Reynolds
    Posted July 31, 2008 at 8:54 pm | Permalink

    The Tories must pledge to halve public spending on QUANGO's & consultants while cutting the state sector payroll by at least 50% of what Labour increased it by . The aim should be to slash public spending growth to 0.5% p/a in real terms until the PSBR has been wiped out . Big government means more taxes now and more taxes for future generations in the form of a high PSBR and that paves the way for Euro-land style decline . As someone on just over £12,000 p/a I want ' Tory Cuts ' if it means a basic personal allowance of say £12,000 ! Why not redistribute money towards the working poor away from Labour waste ? Sounds like modern compassionate conservatism furthering the cause of social justice to me…..

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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