More top Tory tips For Lib Dem Tax Commission

As our Lib Dem Tax Commission prepares to promote its policy paper in advance of Conference, where members will have to debate and vote on adopting what are really quite complex policy issues, and the Tories are getting the evidence together for their own tax policy group, William Norton helpfully outlined a "ten point briefing on tax policy" at ConservativeHome today.

It hasn't generated as much interest as the Bow Group suggestions from yesterday but it's equally important for the questions it seems to ask of policy movers and shakers when they are considering tax direction and what can be sold to the electorate. It charts the history of Tory tax pledges since the mid-seventies and the sort of promises that have been successful and the circumstances in which they can be successfully delivered.

For the Lib Dems, I think the most pertinent section lists the various Tory manifesto pledges during Mrs Thatcher's period in office. What surprised me was that when we think of that Tory government we have been conditioned to think of cuts, in tax and spending, in "selling off the silver" and yet the specific promises in those manifestos are so short, so light on detail that they're worth quoting here:

• 1979 Conservative Manifesto: “We shall cut income tax at all levels …and reduce tax bureaucracy. It is especially important to cut the absurdly high marginal rates of tax both at the bottom and top of the income scale….Raising tax thresholds will let the low-paid out of the tax net altogether…The top rate of income tax should be cut to the European average and the higher tax bands widened.” It was made quite clear that this would be paid for by an extension to VAT. More space was devoted to trade union reform.
• 1983 Conservative Manifesto: “Further improvements in allowances and lower rates of income tax remain a high priority, together with measures to reduce the poverty and unemployment traps.”
• 1987 Conservative Manifesto: “In the next Parliament: We aim to reduce the burden of taxation. In particular, we will cut income tax still further and reduce the basic rate to 25p in the £ as soon as we prudently can. We will continue the process of tax reform”.
• There was more detail in the 1992 Manifesto, which was only to be expected since the Election immediately followed Norman Lamont’s Budget and it repeated what he had said. For the longer term it promised: “We will make further progress towards a basic Income Tax rate of 20p. We will reduce the share of national income taken by the public sector. We will see the budget return towards balance as the economy recovers.”

Now sure, we all know that there must have been much work done behind the scenes, many figures checked and double-checked and the feasibility of different methods and time-scales for doing each of these studied in depth. But if it were today, someone like the Institute for Fiscal Studies would be straight on the story at the first whiff of a policy popping out to check whether the sums add up, seemingly to the penny.

Indeed we often deride politicians who suggest that they want to see the "books" properly when coming to power before risking making specific proposals for implementing such ideas. But it's common sense isn't it. Opposition parties do not have access to the whole of the Whitehall machine. Why should they be expected to know in advance whether their policies are absolutely solid? Gordon Brown is in power and changes the rules every so often to magic up some adjusted statistic, what chance those who cannot change the rules unilaterally?

And remember, in 1979 the Tories were also promoting what to many seemed a fanciful but far reaching shift in economic focus - from Keynesian state support for the economy to concentration at all costs on tight money supply control (I seem to remember even as a teenager at the time that their various Chancellors also changed the rules to suit them in this period - changing which monetary aggregates to monitor and the targets that should be applied).

And the public is skeptical too; perhaps - I don't know - more-so now than twenty-odd years ago, or maybe it's just more demanding, more prepared to believe Evan Davies than any politician. Rightly or wrongly we policy wonks seem to think they want all the detail before they can be convinced. And perhaps more crucially that more detail makes it all sound more convincing. And I'm not entirely sure that it does.

Direction rather than detail

So, when we get stuck into our debates up to and at Conference in a few weeks' time we should be thinking about very broad direction and not necessarily the detail of individual measures we might use if in power to get there. It might even help to be that much clearer about direction if we find ourselves having to choose one of the other parties to support after the next election. Parties traveling in the same direction on tax would find it easier to agree on different steps.

Yes, all the wonk work is necessary to give conference in particular and more widely the media and public some sense of how we would implement that direction but is far less important than we wonks would make out. The detail will change for a start, almost every day, every month from the day it is set in stone as "policy" as the economic environment changes. It will change dependent on the successes of implementing other policies should the opportunity arise. And direction, tax philosophy call it, is easier to convey to people than hypothetical examples of what we would have done in the particular circumstances of 17th September 2006.

A concentration on the detail as if it sells itself is what troubled Charles Kennedy that day during the 2005 election when he couldn't quite remember one specific set of variables that in the end really didn't mean much to real people I suspect.

And so...

William Norton finishes by reminding us that "perhaps the most important policy before either stability or tax cuts are sought is to decide how much public spending the country can afford, the items on which you want to spend it, and why."

As Liberal Democrats this is more apt even that for Tories. If we see economic and fiscal policy more as means to particularly desirable public or social ends then we ought to be ready, as we have shown in the past, to change our tax policies and outlooks in response to other policy desirables and external circumstances. Such was the case, for example, with the penny extra for education - we get criticism for dropping it, but dropping it was the right thing to do in acknowledgment that the right amount was now being spent, if not wisely or efficiently, in education, and that we no longer needed to raise more to fund it.

So here's my pitch - we already have a stated direction, from our mini manifesto of 1998 that we should reaffirm:

"[to] create a more sustainable and fairer tax system by shifting taxation onto pollution and resource usage and off people"

And for the detail, decide merely that this will mean:

• progressively lower taxation on incomes, profit and capital, replacing them with
• progressively higher taxes on scarce or depleting natural resources such as land, non-renewable energy, water, clean air of which the abuse hurts us all and of which the stewardship is ultimately a strategic function of us all expressed through the state.

If you believe us land taxers, we would have you believe that this will over time lead to a lower share of national income needing to be taken in taxes (even allowing for the current apparent consensus on higher spending on public services), as they will help stimulate efficiencies in an ever more uncertain market and raise economic prosperity more equally around the country and reduce the need for the massive intra-regional transfers that happen to prop up less prosperous regions.

Paying for what we take and use, not for what we make and save.

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