Wednesday, March 05, 2008

Spending and tax

Danny Finkelstein, who is a founder member of the tortoise club, goes to the barricades today to say that any idea of immediate tax cuts under a new Tory Government is absurd and that what will be needed are spending increases. He echoes Andrew Lansley, who has got into lots of trouble over appearing to pledge that a Conservative Government would increase spending on the NHS to 11% of GDP.
Before Finkelstein and Lansley are drowned in a wave of foam-flecked invective, however, what they are actually saying ought to be listened to. Lansley, for example, was not committing the Tories to spending the money - he was predicting that more money will be spent on healthcare, It might be politically inconvenient, but it's also probably true - an aging population means higher healthcare spending. He didn't for example, say that all of this increase would be Government money.
Similarly, Finkelstein points out that sensible Tory policies on education and social welfare, although ultimately they will lead to a smaller role for Government and lower spending, will need money spent on them to initiate them. Britain's armed forces are drastically underfunded - should the Tories ignore them?
This is all very well, but it does run the risk of leaving the Tories as without a raison d'etre. Dogs bark, fish swim, Labour raises taxes. Fine, but what will the Tories do? DK's new Libertarian party has aroused comment by its policy of abolishing income tax. What is really interesting about that is the way it focuses on how massively Labour has increased spending in the last six years. Looking at a budget like these leaves one thinking that it must be possible to cut spending on non-frontline services - we spend £175bn on quangos for God's sake!
What the Tories are still struggling to do is to disassociate total Government spending with spending on 'core services' - the dreaded schools'n'ospitals. If they can successfully manage that, then the debate on tax and spend can grow up a little. At the moment, every pledge to cut tax is viewed as a way of culling nurses, and every spending pledge as a re-introduction of the Poll tax. Rational debate simply isn't possible in these circumstances.

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