The Tories should not let their caution on tax conceal the radicalism of their other policies
What a difference a poll lead makes. If Philip Hammond, the shadow chief secretary to the Treasury, had given an interview appearing to rule out tax cuts in a Conservative first term, when the Tories were behind in the polls or only marginally ahead, there would have been a fullscale revolt. To add fuel to the fire, Hammond talked about government storing up money in a ‘pot’ before giving it back — language which suggests that Hammond has forgotten whose money it is in the first place. But a YouGov poll showing the Tories with a 16-point lead which appeared on the same morning as the Hammond interview quelled any rebellion before it could get going.
Hammond’s comments to the Sunday Telegraph’s Melissa Kite were an overstatement of the Tory position. Key Cameroons are still offering reassurance that the party aspires to cut taxes in its first term even if it cannot pledge to do so.
The tax issue has not gone away, though. All Tories agree that the current tax take of 41.5 per cent of GDP — above that of Canada or Spain as well as America, Australia and Ireland — is too high. There is, however, a fundamental disagreement over what to do about this problem.
There will be no manifesto pledge to reduce the overall burden of taxation; the leadership has put too much stock into ruling that out to change tack now. If David Cameron and George Osborne were to reverse themselves on this, they would raise questions about the sincerity of every one of their positions. It would also be seen as a victory for their internal critics, a Clause Four moment in reverse. Gordon Brown would — the modernisers rightly say — have the opening he craves to depict Cameron and Osborne as ‘the same old Tories’, even as Tory ultras claimed that the public had finally twigged that funding doesn’t equal quality. It would be a brave man who would bet the Tories’ election prospects on the slogan ‘investment versus Tory cuts’ not working a third time for Labour. While a promise of tax cuts would not chime with the reassurance strategy that the Tories are currently pursuing on the economy.
It should be noted that there are also economic arguments against any commitment to upfront tax cuts; although the case for the current position is normally made primarily on political grounds in private. It is only creative accounting which enables the government to claim that national debt does not already exceed 40 per cent of national income. Indeed, by the Maastricht criteria it is already over 43 per cent and heading north at an alarming rate. In these circumstances, increasing government borrowing even as a short-term measure would be reckless.
There is also the distinctly dicey economic situation to be considered which could see both growth and tax revenues fall drastically in the next few years. Meanwhile, the Tories are committed to above-inflation increases in both education and health spending — a necessary political insurance scheme against Brown depicting the Tories as a threat to schools and hospitals — and a failure to increase defence spending would both mark the Tories out as unserious about Britain’s role in the world and make them complicit in a breach of the military covenant. There is also the commitment to increase development aid to 0.7 per cent of GDP which the Tories have pledged to meet. Like Alistair Darling last week, Osborne will have little to work with.
To those who want tax cuts all this is deeply unsatisfactory. They say that it is, in more than one way, balls for Cameron to decry in his Budget response the ‘highest tax burden in our history’ but then not to propose to do anything about it until 2014 at the earliest. To them, it is equivalent to handing Brownism a second term regardless of the election result. They look at Cameron and say ‘so weak’.
The same poll that showed the Tories 16 points ahead offered apparent support for the cutters’ argument. Two thirds of the public favour the government taxing and spending less while 60 per cent think that taxes could be cut without harming public services. The cutters take this as evidence that a guaranteed tax cut would rally the faithful, give those who don’t vote a reason to turn out and reach the parts of the country that other Cameroon policies do not.
Tax is, though, in many ways a proxy issue. It is increasingly to the conservative move ment — if not the parliamentary party — what Europe used to be; the issue on which passions run highest and the one that instantly identifies the faction to which a Tory belongs.
Many of those who want tax cuts suspect that the leadership’s failure to offer them is proof that it isn’t really Conservative at all. They fear that Cameron is too politically timid to do more than govern. For all the talk of ‘being the change’, they say, Cameron is just offering more of the same.
Cameron hardly refutes that charge when he sums up the Tory pitch as: ‘Let’s stop making it worse, that is both something we could do and something that is believable.’ But a Tory government would do radical things. Both its education and welfare policies are things that the right have long craved. But the leadership is failing to communicate this message.
When the polls show the party 16 or 13 points ahead this hardly matters. But if Brown fights back (and as his record shows Brown is nothing if not resilient) Cameron will want the right squarely behind him. There are, obviously, some who will never be reconciled to Project Cameron. Their issues are more personal than substantive. But those whose concerns can be eased should be at least partially reassured by what the Conservatives have planned for the coming months.
The shadow Cabinet will soon start talking far more aggressively about waste, making the case that the dramatic increase in public spending under Labour — it is now a higher proportion of GDP than in Germany — has failed to deliver the world-class public services that Labour claimed it would. Once the party has rolled out its green tax proposals it will be able to specify what family taxes will be cut from the money raised. There is also word that Osborne is casting around for another set of symbolic — but cheap — targeted tax cuts similar to the inheritance and stamp duty ones announced with such success at conference last year.
Following these two commanding Tory poll leads, the question is whether the boring Budget finally marked the moment when Britain became bored of New Labour for good. It might have done. But if the Tories are to lock in their poll lead, Cameron must, to borrow a phrase from Obama — something which the Tory leader’s spring conference speech showed he is not averse to — demonstrate that he understands ‘the fierce urgency of now’. Relying on Labour to lose the election all by itself would give the dogged Brown an opportunity to claw his way back to parity.
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