May 1, 2015 by Paul Goldsmith
Before the 2010 election, the Conservatives said that they wouldn’t raise VAT should they be in government after it. They raised VAT. Perhaps this is why they made a quite extraordinary decision this week to announce that they would enshrine in law a “tax lock” which would make their next government legally unable to raise VAT, income tax and National Insurance.
This commitment, which effectively ties a Conservative Party’s Chancellor’s hands in terms of control over a way of raising over 60% of our tax revenue, is the latest in a long line of the main parties promising to put into law promises they make. We have had declamatory legislation (laws that are more about aspiration than restriction) such as a commitment to spend 0.7% of GDP on international development. We have had a ‘Fiscal Responsibility Act’ which was hurriedly passed in the last months of the Gordon Brown Labour Government to commit to halving the deficit.
Announcing this, David Cameron said that the reason he could make this commitment was that he had “seen the books” and so was confident that it would be possible to meet the Conservatives’ plan to clear the entire budget deficit by 2019 without raising these taxes. He decided to claim that the Conservatives were the party that would put money in the pockets of working Britons, and Labour were the party that would take it out.
But Labour, as they have been often in this campaign, we’re ready with their answers. In fact, the right-wing Tory diehard Daily Telegraph helped them. It pointed out this morning that the policy was effectively committing the Tories to making large cuts. Those cuts would have to be even greater should there be a recession or any economic instablility that was affecting tax revenues, as they couldn’t raise any more taxes from the three taxes they would be committing to not raise.
Labour, who have committed to freeze business rate at least, noted that the Tories, supposedly the party of business, hadn’t committed to not raising business rates, or corporation tax, and would have little other option under their plans should there be another economic crisis. Remember, we have Greece possibly defaulting and/or leaving the Euro and the instablility caused by the behaviour of Russia, Iran and the activities of so-called Islamic State. George Osborne has stated publicly before that he doesn’t like having his hands tied, so it can only be politics that is making him allow that to happen now.
Make no mistake, this commitment is about politics, not economics. In a way, it is about the paucity of politics in the UK now. That mainstream parties feel that they can’t just make a promise but they actually have to make a law to force them to keep their promises just reminds us how many promises get broken by politicians. Labour, when asked whether they would be making a similar commitment, pointed out the previously broken VAT promise, but also that they have more room to manoeuvre because they have already been open on their plans to raise the top rate of tax back up to 50%, put a mansion tax on properties valued on over £2million and tax bankers’ bonuses.
Luckily for the Tories, any rule or law that they make can be overturned by a vote in Parliament just as easily. It would be a humiliation for the Tories should that have to happen. But, they will be thinking right now, that won’t matter so much as long as they are in Downing Street. It is sad that putting themselves into Downing Street at any cost is more important than anything else right now. That, I guess, is Lynton Crosby for you.