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October 19, 2006

Tax Cuts for the Poor

Posted by Watlington

Yet again Mr Cameron plays a delicate balancing act: Throwing a bit of tax commission red meat at the Tory activists, but tamely dancing round the proposals for the intelligentsia.

Alan Duncan on Newsnight last night was a master of historic understatement -"you might think that, but I couldn't possibly comment" was his answer to every question from Mr Paxman.

But are the Tories missing a trick? Terrified of being accused of being slashers and burners by Labour, traumatised by being labelled the party of greed, the Conservative leadership think that only by proposing to raise green taxes and conversely allowing family taxes to go down, can the moral case for lower taxation be made.

Senior Conservatives - most notably policy supremo Oliver Letwin - believe that if the Tories propose pre-election tax cuts, they won't be believed and that the Tories will be characterised as the friends of the rich yet again. Unlike Conservative Home and the Taxpayers Alliance, Watlington has some sympathy for this view - alongside the opinion that debt must be curtailed and the finances put in order before taxes are cut substantially. To propose 21 billion of tax cuts - as the Tax Commission proposes - will give huge ammunition to Labour and will enable them to send believable inflammatory leaflets to pensioners in marginal seats, saying that their pensions and hospitals will be under threat etc.

Nevertheless, there is one way to possibly square the circle. The Conservatives should propose one major tax cut pre-election. It shouldn't be business tax or inheritance tax - (seen unfairly as helping their rich Tory friends by the public).

It should be to lower taxes for the lower paid and the poor by raising the tax threshold substantially. Although this is one of the proposals of the tax commission - it is drowned out by their other proposals. A tax cut for the poor would allow the Conservatives to claim they are helping the least well off. Properly done, it would help make the moral case for lower taxes and if it was the only tax cut promised, would define the Tories as the party of the less well off in advance of the election. Moreover it would - if it was the only tax cut pledged - ward off scare tactics from Labour about the alleged threats to public services.

Before the last election, some senior Tories like Lord Saatchi fought valiantly for such a proposal. Unfortunately this was opposed by Michael Howard's Special Adviser, Rachel Whetstone, who preferred a tax cut on savings - which was announced in the final weeks of the election campaign and barely registered a modicum of support. This was an opportunity missed. Let us hope it is not missed again.

To read more by Watlington, see Watlington.

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Agree entirely. This is the only commitment we need to make. We should unveil this very close to the election.

Posted by: Praguetory at October 30, 2006 11:03 AM
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