Tory Modernisation (Part 1)

The Tax/Economy Paradox solved

The paradox was this: Although the Conservatives enjoyed a significant lead on ‘taxation’ from 1997, the party remained significantly behind Labour on the ‘economy’ in general.

ICM’s records show a continuous lead from April 1997 to the present day on taxation. In other words people like tax-cuts and see the Conservative party as the tax-cutting party. However, on the economy in general the Conservatives were consistently well behind Labour. 

This had a lot to do with history; the ERM, boom and bust and so on. However, public scepticism over the party’s economic competence was perpetuated by un-costed tax cut proposals. Rightly, the Conservative leadership post 1997 realised that taxation was one of the few issues where the party enjoyed a lead. Their mistake was exploiting it. Doing so produced un-costed tax-cutting rhetoric. It looked wreckless and undermined the party’s broader economic credibility. 

A key part of the modernising process was to talk far less about tax cuts. The particular difficulty was with un-costed tax cut pledges, a trap which William Hague and Michael Howard both fell into. David Cameron learnt from their mistake. As a result he is the first Conservative leader since 1997 to enjoy a lead over Labour on the subject of economic competence. 

Integral to the success of the Inheritance tax proposals announced at Conference was the attempt to fund them with a new tax on non-domiciles. People could see the tax cut and they could see where the money was coming from. It was an attempt at joined-up economic thinking.

Equally, David Cameron avoided any pledge to reverse the government’s abolition of the 10p rate, even when confronted by an angry member of the electorate. Despite the short-term temptation, he refused to make an un-costed tax promise.

Interestingly, despite a more measured approach to taxation, the party’s lead on taxation has not diminished at all. However, Labour’s lead on the economy has been narrowed and in some polls reversed. 

The Conservative Party, having regained much of their economic competence, is now able to offer a serious alternative at a time when the government’s own economic competence is fledging.

Tomorrow: ‘Don’t mention immigration!’

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2 thoughts on “Tory Modernisation (Part 1)

  1. Woah Woah Woah Woah Woah!

    I return from exile, at the kind invitation of Mr Cowdrill, to find that he’s exploded in a huge mess of supposing and wondermento to claim that the Conservative Party has a solid grasp on the needs of the nation’s economy. Deary deary deary me.

    Mr Osbourne did, as the record shows, make his announcement regarding the plight of the millionaire last year and there was a large press (not necessarily public) reaction to the initiative. I have no problem in saying this – it was an initiative in the classical definition of ‘a new idea’. Note that this infers no mark of quality – it was actually a bloody daft idea but that is a whole different conversation.

    I have to TOTALLY stand up against the proposition that this and moves like opposing the 10p tax rate abolition show leadership. Leaders have followers – Cameron follows in the wake of government policy with an expression of outrage; he isn’t going anywhere different.

    On this I will say that I wasn’t a huge fan of the 10p tax issue but also that people like Frank Field worked to discuss mitigating the worst effects of the policy on the few people hurt by it. He had thoughts on alternative or modified ways to approach this policy decision and made it happen. I didn’t hear George or David say one thing that they WOULD do; I heard lots about how they were shocked and what they WOULDN’T have done. This is by no implies leadership.

  2. The point is the Inheritance tax proposals were costed. People could see how a popular tax-cut was going to be paid for. It was not just tax-cutting rhetoric like Hague’s £8bn and Howard’s £4bn.

    On your last point, the fact that the Conservatives held back on proposing any redemption to those who lost out over the 10p rate, gives them more credibility. They were simply not prepared to make spur of the moment, un-costed tax pledges in response to a clear government error.

    While the government have done a lot to lose economic credibility, the Conservatives have succeeded in welcoming it back.

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