16th March 2017
Tories’ Tax Plans Wreckage
By Mick Brooks
With the humiliating U-turn on National Insurance Contributions the Tories’ tax plans are in ruins. With luck their undeserved reputation for economic competence will also be shredded.
The Tories have branded Labour over and over again as the ‘tax and spend’ Party. It’s a dishonest trick, and a very old one.
In 1918 Labour proposed a Capital Levy to pay for the First World War. They called it ‘the conscription of riches’. In the War hundreds of thousands had given their lives, but that was of no concern to the establishment compared with the loss of their money. The Tories shrieked that people’s savings were under attack, though actually only the very rich would pay.
In 1987 the Conservative researchers added every single suggestion and every chance remark ever made by any Labour spokesperson and scared the electorate into thinking that would mean 10p extra on income tax.
Labour under shadow Chancellor John Smith tried to learn from this gruelling experience by carefully costing their programme in 1992. The Tories in office instructed their Treasury officials to pore over the figures for four days before the election. They came up with zero – zilch. The Tories still came up with the slogan ‘Labour’s Tax Bombshell.’
The Tories lie about tax. They always have, they always will.
What about their record? The Tories pretend that not only do they look after our tax money carefully, but that by their stewardship they can ‘shrink the boundaries of the state’. Basically they see all government spending as waste.
In 1979, Thatcher’s first budget cut the top rate of income tax from 83% to 60% and the standard rate from 33% to 30%. The Tories have always had tender concerns for the plight of the rich. Under the Tories today the top rate of income tax is just 45% for those on over £150,000 a year.
They think we’re all stupid. They go for cutting direct taxes such as income tax because you can see you have less money in your pocket or purse. They think you don’t notice the effect on the cost of living and your living standards when indirect taxes such as VAT go up. At the same time as cutting income tax Thatcher’s government put up VAT from 8% to 15%. Likewise the Tories hiked VAT again from 17½ % to 20% as part of an ‘emergency budget’ in 2011.
The point about direct taxes such as income tax is that at least in principle they can be targeted more heavily on the rich. Indirect taxes like VAT are regressive because they take a bigger proportion of poor people’s income, as they are more likely to spend all their money than have any left to save.
How about shrinking the state? When Thatcher was elected in 1979-80 taxes including National Insurance took 33.7% of GDP. When she was booted out in 1990-91 it was 34.6%. When the Tories came in with the same ambition in 2010-11 taxes were 35.3% of GDP. In 2016-17 it’ll be 36%. In 1964-65, fifty years ago, it was 36.2%. Some ‘shrinking of the state’!
What the Tories are really after is redistributing the tax burden in favour of their rich patrons. Over the next few years they propose a £70bn tax give-away to big business and the rich, while they prescribe austerity for the rest of us. Corporation tax stood at 28% in 2008. It’ll be 19% in 2017 and just 17% in 2020 – the lowest rate of business tax in the G20 economies.
The threshold for Inheritance Tax is to be raised, all while we are told we can’t afford to finance the NHS properly and social care is in crisis. In fact Inheritance Tax is voluntary – only 8% of estates pay it. Plug those loopholes!
The Institute of Fiscal Studies reckons that average earnings will be no higher for fifteen years, from 2007 to to22. This hasn’t happened before since the Napoleonic Wars. The Tories have failed to lift us out of the pit of austerity. There is now a black hole in their tax plans. They need to be turfed out as soon as possible.
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