Clarke Dampens Expectations Of UK Tory Tax Cuts

by Robert Lee, Tax-News.com, London

17 July 2009

Shadow Business Secretary Kenneth Clarke has played down the chances of a future Conservative government being able to cut taxes, warning that a long period of fiscal consolidation lies ahead before the country can afford to reduce the tax burden.

Indeed, Clarke has indicated in recent remarks that, if returned to power next year, the next Tory government would do well to avoid increasing taxation, let alone cut tax, given the worrying levels of the UK budget deficit and debt levels.

"Tax cuts come when you can afford them if you are a responsible government,” he commented following a speech to the Institution of Civil Engineers. “We aren't committing ourselves to any tax cuts because people can see that until you have made some progress on public spending you can't afford any tax cuts."

According to the Centre for Economic and Business Research (CEBR), the next government will need to take fiscal action of around GBP100bn (USD164bn) in tax rises and spending cuts to correct the fiscal deficit, which is expected to reach GBP158bn by 2014/15 if no action is taken.

While most would accept that the pressure on taxation in the UK will be up rather than down in the coming years, Shadow Chancellor George Osborne has nonetheless outlined plans for a revenue-neutral cut in inheritance tax and tax relief for married couples, to be paid for by cutting expenditure and eliminating certain complex tax relief schemes.

David Cameron has been careful since becoming Tory leader not to make rash pledges on tax, for instance by proposing cuts in personal and corporate income tax rates, which he may not be able to keep as Prime Minister, However, Clarke’s words have cast doubt on whether the Tories would even be able to deliver party’s currently modest tax cut proposals.

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