To cut or not to cut?
The big question raise this week by the Conservatives 'Competitive Britain' review commission was not whether to cut taxes, but which taxes to cut; and by how much.
I have made the point before that the public aren't complaining about taxes, in fact I think they would rather pay a bob or two extra and leave worrying about the poor and needy to the Government, deep down; so banging on about tax cuts won't win votes - so why did shadow Chancellor George Osbourne seemingly accept most of the proposals?
In short, because the private sector generates profits, it generates growth whereas the state sector does the opposite. For example, if a new hair salon opens and is popular and profitable it will quickly fund a second salon, expanding to bring a third and so-on; each employing new staff. On the other hand a new Government service -as it expands- simply becomes a bigger cost to the taxpayer.
The more the state takes from successful shops in taxes to pay for their expanding service, the longer it is before our salon (and other shops and businesses like it) have the money to open their new branches.
So reducing taxes is essential for increasing economic growth.
That is why the main thrust of John Redwoods proposals involved cutting corporation taxes; companies allowed to retain more of their profits will invest more and grow faster.
And it is also why Conservatives are right to promise to gently reduce the percentage of the economy spent by the State; 'sharing the proceeds of growth' between reducing taxes and spending on public services.
In the 1970's the situation reached meltdown - so much money was being taken by the then Labour Government that the country's economy went into permanent reverse, tax revenue collapsed and by 1976 the Government could not pay it's bills - it went bankrupt.
We are closer to this scenario than Gordon Brown would have you believe. Don't imagine that the same thing couldn't happen again.