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!’