This is fine as an academic exercise in political theory and great as objectives for a new government.
But it is not rooted in the stark reality which their excellent team of writers outline daily in the Business section. (The editor should try reading it sometime - it’s much better than the main section)
The IMF and Standard & Poores have spelt out in no uncertain terms that within about a year a plan must be laid down to bring state finances back into balance. If we don’t, the cost of borrowing will soar and ruin us all.
Moving into power involves dealing with matters as they are not making policy in a vacuum. Spending Plans will be in place and contracts made. These have to be unwound and careful legal safeguards assured - and that takes time. For instance many employees of quangos will have employment contracts. Suddenly stopping work in progress will put up unemployment which itself costs money in benefits as well as in lost taxes.
So cutting back the state will be the work of a parliament and will not be quick enough for the international markets. So to fill the gap taxes may have to go up but as a temporary measure. Indeed one Tory commentator has suggested that any tax increases should have built into them ‘sunset clauses’ limiting their duration.
There is no doubt that the whole instincts of the Tory party lead to lower taxes but - as happened when Margaret Thatcher’s government saved the economy - the route to lower taxes is a sound economy and if temporary are necessary for that so be it. Spending cuts on a draconian scale will be needed too but as I have suggested, many of these cannot have immediate effect.
Christina
TELEGRAPH
18.7.09
Post-election tax rises need not be inevitable
Politicians should tackle excessive public spending before contemplating punitve tax cuts. [Silly remark! Getting the economy straight will dictate both approaches. But cuts cannot be instant whereas taxes can be! -cs]
Telegraph View
A counsel of despair has gripped our political classes. It is taken as given that, whoever wins the next general election, taxes will have to rise. Why is this inevitable? It is considered essential in order to plug the vast chasm of indebtedness that will be Labour's legacy after 13 years. During that time the party has tested to destruction the notion that we can simply purchase better public services with ever-increasing amounts of taxpayers' money. We are stuck with a model of welfare and health delivery that was set down in the late 1940s and has hardly changed since. Instead, what is needed is a complete rethink about what the state should and should not be doing.
Why, for instance, is it necessary to continue to pay child benefit to everyone, regardless of income; why is serious consideration not given to charging for visits to the GP or for overnight stays in hospital?
There is little from any of the major political parties to suggest this state of affairs is going to change in any fundamental way. And yet, unless it does, we face being bankrupted. We are asked to believe that in good economic times it was essential to levy high taxes in order to raise money for investment in public services; yet it is also necessary to do the same in hard economic times to pay for the indebtedness caused because not enough was put by in the boom years. This is madness. Yet while the Conservatives make the right noises about their long-term tax-cutting instincts, the expectation is that an incoming government led by David Cameron would raise taxes because of the parlous fiscal position the country is in. It is said that the Conservatives might be prepared to increase VAT, freeze personal allowances or increase green levies. In an encouraging sign, Kenneth Clarke, the shadow business secretary, yesterday made clear that he was strongly opposed to higher levies on companies. As the corporate sector will lead us out of the economic doldrums, that must be right.
If anything, there is a strong case to be made for lowering business taxes in order to encourage investment and entrepreneurial risk-taking. And is there really no option but to raise taxes on the rest of us?
The real reason such a step is being considered is that none of the parties will commit to reducing expenditure on a scale that will make a serious difference to the nation's finances. Their reluctance to do so owes everything to a refusal to consider that a recalibration of the entire system of public sector provision is what is needed, and not further tinkering at the edges. This requires a political case to be made out for a smaller state – one that does less and allows people to keep more of their own money to spend and put aside for medical bills and elderly care. Presently, we are beholden to a state that takes our money away and then wastes it.
In 1993-94, total spending was £283 billion; today it is £623 billion. Had it risen over the same period in line with inflation, this year it would be £404 billion. In total, the Government has spent a trillion pounds more than it would have done had expenditure grown in line with prices. While few would deny that some services have improved, they have not done so commensurate with the amount spent on them, largely because so much has been wasted on administration, failed IT projects, inefficient procurement and doing things that the state no longer needs to do. For such an outlay, we were entitled to see spectacular improvements in educational attainment, health care and infrastructure; we have not. Mr Cameron has conceded that a Tory administration would need to take tough decisions, with deep cuts expected in some government departments. However, something far more radical is required if the principal cause of this country's predicament – excessive public spending – is to be tackled. That is the real debate our politicians should be having.
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