Saturday, October 21, 2006

Taxing Tories.

Project Cameron has been founded on generating an image for the party. So far, the New Tories have managed to avoid any mention of concrete policies - especially as the last lot of Cameron policies resulted in their third election defeat in a row. But, the report from the Conservative Tax Reform Commission finally surfaced this week. No doubt, it will delight the Tories who hide behind the cover of the Taxpayers Alliance. It won't surprise you to learn that the report doesn't applaud government expenditure, but demands that money be returned to the taxpayer, who can apparently make better decisions as to how it might be spent.

Cameron couldn't ignore it - and probably wouldn't want to, as the merest mention of taxcutting is guaranteed to trigger an instant paroxsysm of orgasmic pleasure likely to endanger the hearts of most of the Tory membership. When it comes to suggesting £21 billion, that's pumping intravenous Viagra into the members. Cameron had to provide some support and called it
'the most significant piece of work on reforming and improving the tax system ever undertaken by an opposition'

thereby sending the message to the Tory faithful that the party still held to the Thatcherite tenets of slashing the state, but Cameron and Gideon Osborne are simultaneously pushing the line to the rest of the audience that the next Tory government will hold public services safe in their hands. Quite how they reconcile the two is a huge challenge.

The report was produced by a committee chaired by one of the many Thatcherite cast-offs, Michael Forsyth. Before he was elevated to the Lords, he used to be a Scottish Tory MP (remember them?) and was the last Tory Secretary of State for Scotland. Also on board was a member of the Centre for Policy Studies (a Thatcherite think-tank), someone from the Institute of Directors, someone from the CBI and a couple of tax lawyers (who devote their careers to finding imaginative ways to legally avoid paying tax).

In addition, they could call upon the business experience of Sir Christopher Gent, chiefly remembered for engineering the Vodafone takeover of the German company Mannesman, which resulted (after he left the company, naturally) in the biggest pre-tax loss for any UK company ever - almost £15 billion.

And then, there was Peter Reith. Peter Reith is an Australian politician - another bloody imported Aussie when you would think that the Tories would have learnt enough from hiring in John Howard's cast offs. Back in 2001, Mr Reith was the Minister for Defence in the Howard government when HMAS Adelaide intercepted a vessel carrying asylum seekers. The Liberal administration (Tory in all but name - how unlike our own) was trying to appear tough on illegal immigration and fell like vultures upon the story that those aboard that leaky tub of a vessel had thrown their own children overboard to ensure that the Australian Navy rescued them all. This was grist to the mill that those prepared to pay all their savings to people-smuggling gangs were actually cynically driven solely by the prospect of a barbie on the beach at Christmas. The get-tough policy received public support and John Howard won another victory in the Federal elections.

Sadly, it appears that both Mr Howard and Mr Reith may have had only a passing relationship with the truth over the matter, as both were made aware that the rumours about kids being chucked into the ocean were entirely spurious. Complete cobblers in fact, as a later report showed. That didn't stop both of these senior politicians from continuing to push that line until it became completely untenable.

Mr Reith also has a background in labour relations - having been an ardent backer of an Australian port company that decided to sack all its employees and liquidate all assets overnight. Curiously, this didn't stop the ports operating the following day, as new workers were already in place on lower wages and with fewer rights. Even more curiously, they worked for a different company which was owned by the same people who had owned the previous company. Peter Reith saw nothing morally wrong in this - indeed, it was the Howard government that had made it all possible, as part of an attack on unionised labour in Australia, led by Mr Reith himself.

You will note that this committee includes no representation at all from the shop floor or from the unions. The former deputy chairman of the board of the Inland Revenue does have something of a track record in looking at low pay and taxation issues, but otherwise, it is fair to say that everyone else has a history of being more involved at the top end of the income sector and on the right of politics. The commission conducted a survey amongst businessmen, but didn't ask questions of the employees - the ordinary man or woman in the street.

Colour me surprised then when one of their first suggestions was removing stamp duty on share trading and also cutting the base rate of corporation tax to 20p, while abolishing the higher rate. IHT is for the chop, along with any tax-free employee benefits (make the serfs suffer so the bosses get their tax breaks on the share options).

The committee makes the assertion that
'The complicated high-tax system is harming the economy, impairing its competitiveness. Without urgent reform, it will only get worse.'
which, as Fair Deal Phil points out
'comes on the very day a United Nations report is published showing that £85 billion of inward investment came into Britain last year, making the UK the most popular destination for investment in the world.'

Our economy hasn't been hamstrung by taxation - consider this piece by Snowflake5, who quotes Anatole Kaletsky of The Times:
The after-tax incomes for the top 1 per cent of the British population, which consists largely of financial professionals, have grown faster than ever before in modern history. They have grown far richer under Labour than they did under Margaret Thatcher
Snowflake keeps an eye on the economic stuff. Back in August, she noted that this high tax system was still leading to improving productivity - some way to go to catch up with the traditional high-performers, but we're getting there. Despite Gordon burning the midnight oil developing a thousand new stealth taxes to energise the Tories, from 2000-2003, our economic growth outstripped that of the low tax USA and the Treasury was forced to revise the forecast for this year upwards. We're doing OK.

So, the shorthand version is that despite 'the complicated high-tax system' doesn't appear to be causing major problems with growth or productivity and incomes are continuing to rise. Of course, they will never rise fast enough to satisfy these particular fat cats. Indeed, their first line is that there are 3.5 million more people paying income tax than there were a decade ago. Perhaps that's because more people are in work and in better paying jobs? A decade ago, we didn't have a minimum wage, so people were living off the state rather than contributing to it - hardly an ideal situation for the Tories, you would think.

They tell us that these proposals are 'not expensive,' but make no proposals at all for expenditure savings required to make these changes affordable at all. They define 'not expensive' as around £21 billion - which must make Chris Gent's Mannesman-inspired loss at Vodafone of £15 billion a veritable bargain. Labour have won the argument on tax by explaining the link between taxation and expenditure - showing people that their hard-earned money is being spent on the NHS, the police and education and demonstrating the improvements therein. The Tories can only win by reversing that process. They must convince us that we can maintain the improvement in public services and still cut back on the tax take.

Whatever Cameron/Osborne may claim now, don't be deceived. A Tory government would be a tax-cutting government. And where taxes are cut, services are slashed as well. You cannot have one without the other. Their beloved Margaret demonstrated that time and again.

For all their claims, they've not moved on a single inch - they still buy into the economic theories that delivered us the 1980s and early 90s. For all the Tories adore those years, some of us remember what it was like to be on the other side and we know that we can't allow that to happen again. These proposals are a solid reason to back Labour - you know it makes sense.

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