Tory Tax Cuts? Don't Hold Your Breath!

by Robert Lee, Tax-News.com, London

05 June 2006

George Osborne, the finance spokesman for the UK's Conservative Party, has promised a major overhaul of Britain's tax system, but has played down the prospect of pledging tax cuts ahead of the next general election.

Delivering a keynote address to a business audience in Manchester, Mr Osborne heralded a new tax policy which he said would be more suited to the challenges of the twenty-first century.

He also condemned the Chancellor of the Exchequer, Gordon Brown, for adding GBP219 billion to the national tax burden and noted that Tax Freedom Day - the point in the year when people stop working for the government and start earning for themselves - now falls a full week later than it did two years ago.

"I am clear. We need to move towards lower taxes," Mr Osborne told the audience.

However, he emphasised that the move towards reduced tax rates had to be achieved in a gradual way that supports economic stability and strengthens public services, with the state consuming a smaller share of national income over an economic cycle.

"The simple truth is this: thanks to the state of the public finances, up-front promises of tax cuts are very unlikely to be on offer at the next election," the Shadow Chancellor declared.

"That is the right approach. It is the only long-term, sustainable path to lower taxes. It means that we will have lower taxes that are built to last. It means we put stability before promises of up-front tax cuts," Mr Osborne went on to add.

In a bid to head off criticism from within the Tory ranks that the party should be thinking more about how to cut taxes sooner rather than later, Mr Osborne pointed out that the promise of upfront tax cuts had failed to attract the voters in the three previous elections.

"It is not credible to promise tax cuts years before a general election when no one knows what the true state of the public finances will be. 2009 is the most likely date of the next election. Given what we know about the expected state of the public finances in that year, would it be responsible to say today that I would definitely cut taxes in a Budget in three years time? Of course not," he argued.

However, Osborne was more clear about the Conservatives' vision for tax simplification, even though he acknowledged that a programme which is both revenue neutral and reduces the cost of complexity is "not an easy thing to do," and that "powerful vested interests" are likely to jealously guard the reliefs and tax breaks they have won for themselves.

Nonethless, the Shadow Chancellor asserted that the Tories "mean business," when it comes to tax reform, and will not shirk tough choices.

"We want people to be able to understand what taxes they are being asked to pay. We want those who have to fill in self-assessment forms to be able to do so without the help of an accountant. Indeed, we want fewer people to have to fill in forms, full stop," Osborne stated.

"This is quite an ambition," he concluded.

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