Monday, August 20, 2007


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.


Barrie Wood said...

My own **personal view** is this :

The only good thing about the return of John Redwood to the political forefront is that it illustrates that the talk of the Tories fighting from the 'centre ground' is just that, talk. What Redwood calls red tape that stymies business, I as a trade unionist see social policy that protects people at work.

'Highlights' from the Redwood produced report include :

* loosening health and safety regulations
* making it easier to sack those in post
* opting out of the social chapter and undermining EU attempts to ensure all workers get 20 days holiday per year PLUS bank holidays
*opting out of the 48 hour working time regulations.

Not impressed with the Inheritance Tax proposals either - I've already blogged on this - see

Marcus Wood said...

You have accepted the Labour party's line on our proposals hook, line and sinker, then Barry?

Redwood was asked to say what would make Britain competitive again; his proposals would do that - like all good think-tanks he has not compromised his brief with what would be politically expedient or possible.

There is no doubt that regulations and unnecessary red tape stifle competitiveness and damage investment - and many of us believe that Government legislation restricting, for instance, how much overtime can be worked is an unfair restriction on the freedom of a willing employer and willing employee to work in the way they want to.

You seem surprisingly 'old left' about this, do you think the French have it right? - a 35 hour week, but only 41% of adults with jobs?

Barrie Wood said...

It is possible to agree with Labour sometimes Marcus. Goodness, I've even agreed with you on occasions !

The 48 hour 'rule' is often abused, especially by agencies, who often insist on candidates waiving away their rights in order to be signed up by the company. The British working week is already the longest in Western Europe and that you see this is seen as a good thing says much about your party.

Under Labour the economy has performed reasonably well to date and this has been married to policies that protect workers, the less well off and effect positive social change. Their record is far from flawless and is, in party, nannying and centralising, but the Tories have yet to show how you'd combine a dynamic economy with social justice[and policies to help the most disadvantaged].

If Mr Redwood wants to revisit the 1980's fine - but electorally it'll do you no good. The Lib Dems are, I feel, more in tune with the electorate. We seek fair[er] taxation rather than increased taxation, with those most able to pay more paying a more proportionate share than now.

I'd be interested in your thoughts on your party's position on Inheritance tax too.

Barrie Wood said...

Ooops too many typos in last post - can spell but time limited, hence rushed 'post' !!

Barrie Wood said...

PS : A rather deafening silence from Mr Cameron regarding the Redwood-led Economic Competitiveness report. Very interesting !