The Tory Strategy on Tax

Throughout the Conservative Party and particularly on the pages of ConservativeHome.com the debate is raging healthily as to whether the Conservatives should continue to offer up-front tax cuts to complement the reduction in Inheritance Tax. Most Conservatives are fundamental tax-cutters and came into the party in order to lower taxation, so it is not surprising that there is a constant push for the leadership to be bolder. But are these internal critics right?

Of course, all the arguments can be made in favour of a bold taxation policy using examples of Ireland, and the proof of the Laffer Curve and such like - (most things which Watlington heartily agrees with). The tax cutter hawks make the additional point that if Conservatives pledge to radically reduce taxes now, then they will have nearly two years to persuade the public as to how the tax cuts will be paid for.

But are the hawks right vis a vis the political strategy? I am not so sure.

The public have long memories of the debacle of ERM and interest rate hikes. Hundreds of thousands of houses and small businesses were forced to close during this time. Many have a residual memory of the "Tory recession" - despite the rise in polls showing greater trust for Conservatives to run the economy.

Moreover, the hawks underestimate the Labour Party. Pledge big tax cuts now and Labour MPs will be armed with letters to send around marginal seats warning of pension or public services cuts because of Tory tax plans. Labour have made "Tory cuts" something of an institution and it won't take long for the public to believe this again.

This doesn't mean that the Conservatives should do nothing for fear of frightening the horses. Indeed, at conference this year, Mr Osborne should propose one big tax cut for the lower paid. This neutralises the key Labour attacks that Tories only help their rich friends etc. It also contains an important element of social justice.

The Conservatives should also use the time available to prepare the ground for future tax cuts in Government, once the national deficit has been reduced. The leadership need to do more to make the moral case for lower taxation and gradually persuade the public that the time is right. If it were not for the work of the Taxpayers Alliance, in making the hawkish case and highlighting Government waste, very little progress would have been made.

To read more by Watlington, see Watlington.