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JOHN HUMPHRYS: If the Conservatives win
the next Election, we shall be paying less tax at the end of their five
years in power than we are at the start of it. Now that is the promise
made by William Hague - and a very silly promise it is too - according
to his critics. Jonathan Beale looks at whether it can be delivered.
JONATHAN BEALE: The Conservatives say this Government
is taking more money away from people, despite a promise not to raise tax.
Gordon Brown has hoarded a fortune since Labour came to power. William
Hague claims that Labour will have increased total taxes by more than 40
billion pounds in the lifetime of this parliament. Much of it has now
been earmarked for improving public services. But the Tory leader says
if they were in power they'd identify new savings. They'd guarantee lower
levels of tax and hand people at least some of this money back. The Conservatives
have long claimed to be the party of low taxation. But until now, no Tory
leader has gone so far as to guarantee to reduce the overall burden of
tax in the lifetime of a parliament - whatever the economic circumstance.
William Hague has done just that. But there are serious doubts as to whether
he can deliver.
Piccadilly Circus on Budget
Day and the Tories alert passers by to Labour's higher taxes. The Chancellor
has cut the basic rate of income tax, but the Tories say he's still taking
more money by stealth, the overall burden of tax has gone up - the Tories
will reverse that.
EDWARD TROUP: Well any commitment to future
action is risky. Any Government that binds its hands or promises to do
things one, two, five years out is running a risk. Giving a guarantee on
the tax burden is doubly risky. The tax burden is made up of two numbers.
It's the amount of tax divided by the amount of national income. Governments
have some control over the amount of tax, they really have very little
control over national income. If national income goes down or if it doesn't
go up as fast as you expect then lo and behold the tax burden goes up -
really nothing to do with Government. So it's a dangerous thing to offer
a long term guarantee on.
BEALE: Conservatives are already
out selling the idea. John Marshall wants to be the Tory MP for Finchley.
When Margaret Thatcher was its MP lower taxes were more an aspiration.
But times have changed and so has Finchley. It's now a Labour seat.
JOHN MARSHALL: What it would do is to emphasise
the difference between the two parties. The Labour government has increased
taxes very substantially we are committed to reducing them. And I think
you will find that those who abstained at the last elections will come
out and vote in droves for the Conservatives.
BEALE: A few miles down the road
a focus group prepares to give its verdict on the tax guarantee. These
women are former Conservative voters who switched to Labour at the last
election, but until now none of them was even aware of one of the Tories'
key election pledges.
UNNAMED WOMAN: The Conservatives, they've ome
up with this because they think this is what the majority of the public
want and if they talk about this great tax guarantee we'll all go out and
vote them, but it's not, because were not all stupid you know. They have
to get money from somewhere .
BEALE: The Tories have already
identified some savings to help lower the burden of tax. They claim
they can release at least 3 billion pounds from the Social Security budget,
a further billion pounds by cutting Government red tape such as reducing
the number of special advisors. They'd also divert fifty-six million pounds
which they say is being used by this Government to promote the Euro. Even
if they could achieve these savings it's still a fraction of the Government's
total spending of 350 billion pounds. Philip Oppenheim now manages his
own bar and restaurant. As a Tory Minister he used to help manage the nation's
finances. Past experience tells him that savings only ever come in small
measures
PHILIP OPPENHEIM: It's incredibly difficult. I
mean the last Conservative Government tried it for eighteen years and they
made some savings. There are always some savings but they're never as big
as you think.
TROUP: Cutting spending is extremely
hard. The welfare budget - the social security budget is well over a hundred
billion pounds now. These are very difficult numbers to grasp. But if you
try to cut one per cent off that, if you try to reduce social security
spending by one billion pounds a year it would mean taking a thousand pounds
a year from a million people and that is quite a hard political thing to
do.
BEALE: The Conservatives have still
to prove that they can make significant savings in public expenditure.
Not least because William Hague has promised to match Labour's increased
spending in both health and education. That leaves him the Herculean task
of persuading voters that the Tories can offer tax cuts while at the same
time delivering better public services.
Both parties know that
the public are demanding better schools and hospitals. Gordon Brown's Budget
may have set the agenda on which the next election will be fought. The
Tories accuse Labour of going back to the bad old days of tax and spend.
But Labour say the Conservatives are defying simple laws of economics.
You can't get more for less.
So John, how are you going
to offer tax cuts and increase public spending in health and education
at the same time? They seem incompatible.
UNNAMED MAN Very simple, only thirty-five
per cent of government expenditure is spent on the Health Service and education.
We'd spend more money on health more on schools and at the same time seek
to cut elsewhere. Under this Government we've got both higher taxes and
second rate public services.
BEALE: Among our former Tory voters,
they're not convinced that paying less tax will give them better public
services.
UNNAMED WOMAN: You know if they do lower taxes
they will take it from somewhere else and I just think that Labour are
a much more caring party than the conservatives. I think they just care
about rich people and that's the end of it.
UNNAMED WOMAN: Saying that they're going to cut
on public spending, what are they going to do, let the roads go to rack
and ruin? Not put any more money in the pensions for the old age pensioners
at the moment.
ANDREW DILNOTT: I think the idea that we can persuade
the electorate that somehow you can get more for less that you can have
better public services without paying for them. In the long run I don't
think people will believe that. You wouldn't believe that in your own
domestic activity so why we should expect the public to believe that they
can have better hospitals, better schools, better universities, better
care for the poor without paying any more rather escapes me.
BEALE: And what happens if the
increased spending in education and health leaves little or no money left
in the bank? How will a Tory Government pay for the promised lower levels
of tax then? The only option left might be for a Conservative chancellor
to borrow.
TROUP: Simply to borrow money in
order to meet the tax burden pledge would be effectively fiddling the
books because it would be putting off the taxation for the future. And
I think that's just a trick that has been used by chancellors in the past,
but the public now I think will see through that pretty quickly
BEALE: Richard Jeffrey is a member
of the Conservatives' Council of Economists - a recently formed group
of experts offering the party independent advice. His is change the policy:
RICHARD JEFFREY: It could be possibly the case
that at the election date the economy was on a peak, the tax ratio looked
very good and then of course the economy dips into recession and the next
election at the end of the lifetime of the Conservative government was
actually at a less advantageous stage of the economic cycle and the tax
ratio had gone up. That is a potential hurdle and that is why I think in
the longer term it will perhaps be more sensible to frame the tax guarantee
in the context of the economic cycle rather than the political cycle.
BEALE: Privately many Tory MPs
too have serious doubts as to whether the party could deliver the tax
guarantee - something they won't say on camera. But comments made to On
The Record included warnings that "...it cedes the ground to Labour on
public services" another MP said "...this could come back to haunt us"
and commenting on the difficulty of selling it to the electorate one MP
quipped " ...It's an argument that won't come over well from the back of
a lorry in Wigan"
They might not be the
only ones looking for a way out. When he took over the job of Shadow Chancellor
Michael Portillo said he was happy to discuss the tax guarantee. It gave
the impression that he wasn't a fan. William Hague later referred to
it as an aspiration. They've both since reaffirmed their commitment but
it'll need more than brave faces to win the argument.
OPPENHEIM: I would say that the Portillo
line that it's an aspiration is probably the wiser line to take, because
a guarantee on reducing the burden of taxation is very difficult to make.
Virtually every government in history has made it in recent years has
regretted that. My guess it it'll be dropped quietly and oppositions can
normally get away with that. I think the tax debate fine, very good idea,
focus on tax, remind the middle classes and quite a lot of less well off
people that taxes have gone up by stealth, remind them of that. But don't
get yourself on the hook of a guaranteed tax pledge because it will make
them look imprudent at the election. I don't think it will necessarily
be deliverable and it will blunt their reasonably good attack on Blair's
stealth taxes and on public spending.
BEALE: Gordon Brown's budget has
signalled the areas over which the election will be fought and won. The
Tories know from history that tax has been labour's Achilles heal. They
can't afford it to be theirs too.
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