Wednesday, October 04, 2006

Tax: The Burning Issue

Since David Cameron was elected the Conservatives’ Leader, one issue has dominated debate within the party, the subject of taxation. Cameron and his intelligent but inexperienced sidekick, Shadow Chancellor “Boy” George Osborne have repeatedly stated that economic stability takes priority over tax cuts. The Thatcherites, led by Baron Tebbit, have understandably attacked Cameron and Osborne for refusing to commit themselves in even the vaguest of terms to reducing the tax burden, despite clear evidence of a growing public backlash against almost nine-and-a-half years of tax increases (particularly stealth taxation) by Gordon “The Brooding Bully” Brown.
The political monetarists are right to press for tax cuts as the lower the tax burden, the more favourable the conditions are for businesses to invest resources within the nation and in turn the greater the overall tax returns are from this environment of increased prosperity. In 2005, the United States of America enjoyed its second biggest year for tax returns thanks to President George W. Bush and both Republican-controlled chambers of Congress’ programme of tax cuts. As the financier and World Wrestling Entertainment Superstar, John “Bradshaw” Layfield has often and rightly claimed, “tax cuts work"!
However, one of the perquisites for tax cuts is a stable economy, a fact that is not lost on Cameron and Osborne, nor would this be lost on Baroness Thatcher, the late great Nicholas Ridley or even JBL. Far too often, politicians have promised tax cuts before being elected to power, only to have then had to increase the tax burden because they have inherited an unstable economic environment caused by high and rising levels of inflation plus excessive and wasteful state expenditure. At a Conservative Party Conference fringe meeting on Monday, Baron Tebbit quoted promises from the Conservatives’ 1979 General Election manifesto to reduce taxation. However, what Baron Tebbit seems to have forgotten is that the tax burden increased during Baroness Thatcher’s first term in office because the dire economic circumstances she inherited from James Callaghan and Denis Healey. Baroness Thatcher’s inability to fulfil her promises to reduce taxation because of economic realities contributed to her low opinion polls ratings between 1979 and 1981.
In light of this precedent, Cameron and Osborne are right not to make promises to reduce taxation before achieving elected office, especially since as Osborne noted that there will not be General Election until 2009 at the earliest. To commit a prospective Conservative government to a programme of tax cuts two-and-half years before a General Election is not only rash, but allows New Labour and the other political parties to go on the offensive and undermined the Conservatives’ current momentum. Whatever ones’ concerns about Cameron and Osborne maybe (and I for one do have some, particularly of Osborne), in this case, their strategy is the right one and it is a strategy that both Baroness Thatcher and Mr. Ridley would approve of themselves. As Osborne quoted from the Iron Lady: “I am not prepared ever to go on with tax reductions if it meant unsound finance. Sound money is the only sustainable path to lower taxes.”

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