The week political opportunism replaced Tory fiscal hawkishness

This week has been a manic one in the political world. Both parties have been jostling around for prime position as they prepare for the official start of the election campaign. The most significant manoeuvrings have come from the Conservatives on tax policy.

In the months leading up to the election, the Tories have sought to burnish their fiscally hawkish credentials and champion themselves as the ‘undertakers’ of Britain’s record public-sector deficit.  However, this week during the critical legislative ‘wash-up’ in parliament, those ambitions were abandoned in favour of a more naked political self-interest.

Due to Tory blocking tactics, Labour was forced to drop three targeted tax increases aimed at addressing the deficit and investing in Britain’s infrastructural future. A planned 10 per cent rise in tax on cider was removed from the finance bill in addition to a proposed plan to end tax relief on furnished property lettings. This was a strange move considering the Tory party is apparently committed to tackling the fiscal deficit faster and deeper than Labour. We all know that if taxes have to be levied, it is socially more productive to target them at so called ‘harms’.

More worryingly though, was the pressure exerted on the government to abandon the so called super-fast broadband tax, a 50p a month levy on home telephone connections, without setting out an alternative way forward. Although there are some flaws in the plan, this policy would have helped fund  universal next-generation broadband and provided an important investment in Britain’s digital economy. The new economy will be built around high-tech and bio-science technologies; super-fast broadband will form the arteries of that. There is now a £175 million funding gap that will supposedly be met by the Tories should they win election, from the BBC digital switchover fund, without harming regional news broadcasting. Not only does this place at risk our media and digital sectors, but fails to appreciate the surest way any country can tackle a deficit in the year’s ahead-job creation and growth in the digital economy.

All this is in addition to Conservative plans to reverse planned National Insurance rises from April 2011, which will be funded by £6 billion worth of efficiency savings, described previously by David Cameron as a “trick“. And the fact that these efficiency savings are not being directed towards reducing the deficit (apparently their number one priority) has prompted serious concerns by experts on the necessary levels of public sector cuts in subsequent years:

“using the bulk of these spending cuts to finance the NI cut means that they are not available to contribute to the task of reducing government borrowing that the Conservatives have set such store by. Reducing the deficit more quickly than the Government plans to will therefore require even greater cuts to public services spending, or to greater reliance on welfare cuts or tax increases that might be as economically costly as the NI increases they are seeking to mitigate.”

The Tories yesterday announced another tax break which will divert resources, this time from a bank levy, away from fiscal consolidation. Political opportunism appears to have taken the ascendancy in the Conservative party.