Is it too much to hope that the Tories might act like Tories and CUT taxes?

WHERE are the serious politicians making the case for lower taxation? There aren’t any — or, if there are, they are making so little noise that we never hear so much as a squeak from them.

On the other hand, there are lots of politicians pressing for more expenditure on the NHS, social care and education. Many in the media are as well — witness the BBC, which has been going on all week about the parlous state of the NHS.

Since we are already borrowed to the hilt — the national debt is increasing by about £125 million a day — it would seem to follow that the only way we can pay for these extra goodies is to increase tax from already high levels.

According to the Institute for Fiscal Studies (IFS), in the year 2019-20 the tax burden will rise to its highest level for 30 years as a proportion of national income, which would take us back to 1986-87, halfway through Margaret Thatcher’s economic revolution.

We should perhaps beware of the IFS since it is ferociously anti-Brexit, and apt to spread gloom whenever it can. But in this instance its figures can probably be believed. Tax revenues appear on course to reach 37 per cent of national income just as we leave the EU.

Dynamic

What seems to me extraordinary is that almost no one in the Tory Party is arguing that the State should take even a slightly smaller slice of people’s income. Indeed, the opposite is true.

Let’s not forget that it was the Tory component of the Coalition that quickly set aside whatever convictions it had in favour of lower tax. In this respect the new Chancellor, Philip Hammond, has taken the baton from George Osborne, and continues to jog along with it.

Far from being a tax-cutter, Hammond has so far not shown the slightest interest in bringing down rates of tax.

He seems to have forgotten the lesson demonstrated by a Tory predecessor as Chancellor, Nigel Lawson, who in the 1988 Budget sharply cut the top rates of income tax — with the net result that total tax revenues actually increased.

And yet the ultra- cautious Hammond has recently issued a rather daring threat, which was almost immediately taken up by Theresa May. He told a German newspaper that Britain might transform its economic model into that of a corporate tax haven if the EU failed to provide us with an agreement on market access after Brexit.

Under this scenario, Britain would turn itself into a kind of European version of Singapore, which, it is worth remembering, has a per capita income almost twice that of its former colonial master. Singapore has much lower income tax rates than we do, as well as lower company taxes.

This prospect has given the antediluvian Jeremy Corbyn a severe case of the vapours. The Labour leader has frequently complained that the Government wants to turn Britain into a ‘bargain basement economy’. If that is what Singapore is, I say: ‘Bring it on.’

But isn’t it interesting that what is in fact an attractive proposition — a lower- tax economy delivering high economic growth — should, in Philip Hammond’s mouth, take the form of a threat?

Only if our friends in the EU deny us full access to the single market are the Chancellor and Prime Minister prepared to contemplate cutting tax in order to boost the economy.

This seems to me to reveal some intellectual confusion. For if a lower tax economy would be good idea in one set or circumstances, why wouldn’t it be a good idea in every set of circumstances? Why isn’t it simply a good idea?

Political and economic beliefs often go in cycles, and the present leadership of the Tory Party seems as wedded as Labour to the notion of a high-spending State requiring a large tax base.

A high-spending State? I can hear some splutterings and exclamations. Surely, many will say, we have endured years of austerity as first the Coalition and then the present Government took a hacksaw to public expenditure.

Opportunity

But it is not so. In 2009-10, public expenditure stood at an all-time high of £671 billion. In the current financial year it is forecast to be £778.8 billion before rising to £886.4 billion in 2021-22.

These figures are most unlikely to turn out as predicted, but they do tell a story. Once inflation has been taken into account, public expenditure has stayed near to the historically high levels inherited from Labour.

What was happened, of course, is that some areas of public expenditure such as the NHS and schools have enjoyed real increases over and above the rate of inflation while others, such as local government and social care, have declined. Meanwhile, foreign aid has ballooned.

It makes my blood boil to learn from the IFS that between 2009-10 and 2015-16, spending on social care for the elderly fell by 6 per cent while spending on foreign aid (much of it misdirected, and open to waste and corruption) soared by 40 per cent. This is a terrible dereliction of duty on the part of government which this administration shows no sign of correcting.

Anyway, my general point is that despite all the grumbling about cuts, the level of public expenditure remains high — much higher, for example, than in the early years of this century when Labour was in power, and no one accused it of grinding the noses of the poor into the dirt.

The truth is that we spend more than we can afford, and almost certainly more than we should if we want a healthy and buoyant economy. The consequence is that we are returning to a tax burden last experienced in 1987.

I appreciate that Brexit is bound to be a time-consuming obsession for the Government. But surely this is the very time we ought to be re-examining our economic model which, though more successful than that of France or Italy, falls far short of really dynamic countries such as South Korea and Singapore.

rather than dangling a lower-tax economy as a threat, Philip Hammond should be seizing it as an opportunity to help boost this country in a post-Brexit world.

As I’ve said, ideas follow fashions. received wisdom may be shifting. In France, the right-wing candidate Francois Fillon is embracing Thatcherite economics, which by definition would entail lower taxes. Unfortunately, he is being harried by corruption charges, which could scupper his presidential chances.

Daring

In the United States, Donald Trump will introduce tax cuts for the rich and middleincome earners as well as for companies, which currently pay a very high rate of corporation tax by international standards.

Fillon may never get the chance to try out his ideas, but Trump certainly will, and there is every reason to hope that comprehensive tax cuts will restore vibrancy to the stuttering American economy.

In its resolute approach to Brexit, our Government is showing admirable strength of purpose. But there is no advantage in being daring on just one front. Britain is entering a new world. It is time to jettison the old baggage.