Iain Macwhirter:
READ my lips: there’s no electoral bribe David Cameron will not consider in his desperation not to lose this General Election. Why else would he suddenly reach back through history to one of the most infamous electoral promises of all time: George Bush’s “no more taxes” pledge in the 1988 US Presidential election which, of course, was broken as soon as he took office?
But this will be different, said the Prime Minister, because it will be legally enforceable. Yes, if the Tories break their vow and put up taxes, the poor PC Plod who stands outside Number 10 will be forced to put handcuffs on Mr Cameron and take him down to the station: “OK Sunshine. You’re nicked”. It’s almost worth voting Tory to witness that.
But this legal commitment to freeze income tax, VAT and National Insurance is absurdist electoral flim flam that isn’t worth the paper it isn’t written on. (It doesn’t appear in the Conservative manifesto.) Tax law is made annually in the Budget, passed by parliament. If Mr Cameron did find it necessary to raise income tax, National Insurance or VAT he could legislate for it there and then. His law could be repealed by the same vote.
But does anyone take seriously such pledges, legally binding or otherwise? Of course not. If anyone in the financial markets believed he was serious, there would probably be serious implications for the UK’s credit rating, as the BBC’s Robert Peston pointed out yesterday. The Prime Minister is tying his hands. He is effectively saying that, if there were another banking crisis in the next five years and the UK deficit were to worsen, he would be unable to use the main means of fiscal tightening to pay down debt.
These three frozen taxes amount to some two thirds of revenue. It is economic madness to legislate for a crisis-free future. And they say that the SNP is economically illiterate. Of course, he could use the alternative of radical spending cuts, but he has already promised an eye-watering £30 billion of those without specifying where they will come from.
Yesterday he said he could make the books balance by curbing tax avoidance and cutting welfare. This presumably means (since no one ever manages to stop tax avoidance) that he will load all the additional economic pain of a future crisis on those who are least able to cope: those receiving the state pension, child benefits, invalidity benefits and job seekers allowance. So much for one-nation Conservatism.
Worse, if he is serious, he would not only be cutting benefits but slashing the tax credits received by nearly four million people, most of them in jobs. This would place an intolerable burden on hard working families who have seen their earnings decline during the past six years at a rate unprecedented since the 1870s.
In that time, Britain’s billionaires have seen their wealth double to £547bn, according to the Sunday Times Rich List; what a great time to freeze taxes. And there’s me thinking that the Tories wanted to show that they were no longer the “nasty party”.
We’ve been here before, of course. Mr Cameron promised not to raise VAT in 2010 and found ways around that. The first and most obvious get-out here is coalition.
Westminster is now a parliament of minorities and, after May 7, Mr Cameron will have to try to strike a deal with the Liberal Democrats as he did in 2010. In negotiations with the LibDems both parties would have to make concessions (remember tuition fees) and this tax pledge might be one of the promises to fall by the wayside.
But even if it doesn’t, he still has a range of taxes that will not be frozen such as excise duties, corporation tax, landfill tax and so on. The thresholds for income tax rates could also be altered, bringing in more revenue without actually raising the headline rates. There are many ways to skin a fiscal cat.
However, a freeze on income tax would pose problems for the Scottish Parliament. Next year, income tax will partially be devolved and the Smith reforms propose that all Holyrood should have complete power to vary income tax rates. But all other taxes, including VAT and National Insurance, will still be set by Westminster
This means any increase in spending in Scotland to meet social objectives or cope with a downturn would have to be piled on income tax, which would be frozen in the south. Indeed, Mr Cameron has promised a special “English” rate of income tax under English Votes for English Laws.
This means income tax could be falling in England as it is rising in this country. That could cause a stampede of would-be tax exiles for the Border .
Other anomalies could arise related to the Barnett Formula. If the UK is forced to slash public spending rather than increase taxes in any future recession, this would have the effect of cutting spending in Scotland.
The so-called Barnett consequentials would turn negative. The NHS in Scotland would be vulnerable even though responsibility for health is devolved. Mind you, no one particularly likes paying tax, and the Prime Minister’s frozen tax return may work in Tory marginal seats, especially in the south of England.
It is generally the wealthier groups who seem to dislike taxes the most, even though most tax is paid by the masses on modest incomes. The rich tend to have an exaggerated sense of entitlement and talk of tax as if is a form of legalised theft.
Mr Cameron shamelessly played on this in his Birmingham speech yesterday by saying a Tory government would not be “reaching into the pockets of hard working families and stealing their money”.
That is a depressing way to talk of taxation and would have appalled moderate Conservatives like Harold Macmillan. Tax is not robbery; it is the membership fee of the civilised society. We all benefit from the collective provision of health, defence, education, civil engineering projects, policing and justice. The idea of providing these services individually, as fragmented individuals is daft; like suggesting we should all build our own roads.
But the Conservatives are in a desperate drive to “consolidate their base”, as political strategists call it. They need to keep their own core voters on side and away from Ukip.
This is why we have had all the antiScottish rhetoric, and the claim that SNP involvement in the formation of any Westminster government would be “the worst crisis since the Abdication”.
The tax pledge appeals to the worst instincts of the self-interested middle classes. The Tories want to brand Nicola Sturgeon as holding Labour to ransom and forcing it to tax England till the pips squeak. But it doesn’t look like it’s going to work, in Scotland at least. The First Minister is the most admired political leader in Britain. According to the latest Ipsos Mori poll, the mad spendthrift SNP are set to win every seat in Scotland. Read their lips: Tory is still a four letter word.
‘‘ We’ve been here before, of course. David Cameron promised not to raise VAT in 2010 and found ways around that