Pamphlet Highlights Tory Rift On Tax Cuts

by Robert Lee, Tax-News.com, London

06 September 2006

A potential rift is opening up within the ranks of the UK Conservative Party on the issue of tax after senior figures backed a plea by a right wing group of MPs for early tax cuts, setting up a possible clash with the party leadership, which is advocating a more cautious line on tax cuts.

In a pamphlet due to be published at the time of the Tory Party conference next month, but seen by the Sunday Telegraph, John Redwood, the party's head of its economic competitiveness review unit, made the "moral case" for lower taxes and issued a plea "for early action to cut our tax rates."

The pamphlet by the Thatcherite No Turning Back (NTB) Group, which counts members of the Shadow Cabinet among its numbers, suggested that the Tories should start with lowering taxes on "effort and savings" and proposed cutting a range of levies including income tax, capital gains tax, inheritance tax and stamp duty on house purchases.

Redwood argued in the introduction to the pamphlet that tax cuts would be a "win win" policy because they would boost economic growth and incomes and in turn increase the amount of revenues that could be spent on public services.

"Lower taxes are not a desirable extra you can add when everything is going fine. Lower tax rates are the way to get everything going well," wrote Redwood.

The publication in unlikely to be welcomed by Tory leader David Cameron who has been careful to cultivate a fiscally responsible image by not making rash tax cut pledges that could then not be fulfilled when out of opposition. In comments published by the Guardian newspaper, Oliver Letwin, who is overseeing the party's policy review across all areas prior to the next election, reiterated the party's new mantra of economic stability.

"We have made it clear - David Cameron has made it clear, (Shadow Chancellor) George Osborne has made it clear - that we put stability before tax cuts," he stated whilst unveiling the party's interim report on public service improvement earlier this week.

"I'm not in a position, and George Osborne isn't in a position and David Cameron isn't in a position today, to make promises about tax cuts," he added.

While Cameron has hinted that he would be prepared to axe stamp duty on share profits as part of a revamp of the UK's pension system, the party has not made any specific proposals regarding cuts in the short term.

However, in a recent interview with the Financial Times, Shadow Chancellor George Osbourne said that a Tory government would seek to shift the burden of taxation onto environmentally damaging economic activity such as the aviation industry.

Criticising the track record of Chancellor Gordon Brown on green taxes, Osborne said he would be "completely open-minded" about the measures he would bring in."

"This is completely the opposite direction to the one Gordon Brown has taken us in," said Osborne.

"He has reduced, as Chancellor, the share of tax take that is taken by green taxes, and we want to head in the other direction," he told the FT.

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