Tories exchange fiscal responsibility for pre-election giveaway

The Sunday Times today reveals more details about the Conservative’s £1 billion tax break for married couples. Combined with their £6 billion pledge on National Insurance last week, it reveals a party which has chosen to sacrifice fiscal responsibility for a pre-election giveaway.

In his conference speech in October, George Osborne set out some of the measures that a Tory government would take to ensure that a priority of the Conservative government would be, “tackling Britain’s debt crisis to stop higher interest rates and higher unemployment for all”.

Earlier this year, shadow chief secretary fleshed this out by saying:

“At the Conservative party conference last October George Osborne said we would make a start in cutting public spending in 2010… That remains our position. We actually set out some specific cuts – some of which would bite in 2010: the Child Trust Funds and the Child Tax Credits… (The scale of the cuts come to) just over a billion pounds or a billion and a half pounds. Something like that.”

But following criticism of the Tories sums by Channel 4 Fact Check, Mr Osborne used his Guardian interview to downscale his estimates of the same Tory cuts in 2010/11:

“In the interview, the shadow chancellor also disclosed, for the first time, that he would not reduce public spending by more than £6.5bn in the current financial year. He said £6bn would come from efficiencies, and £500m from cuts to child trust funds and working tax credits for the better off.”

And the Tories are not just reducing their commitment to spending cuts, they are also increasing their planned tax breaks. On top of the £5.6 billion National Insurance pledge last week, the Sunday Times has today been informed that:

“DAVID CAMERON will this week unveil a £1 billion tax break for married couples… The new tax proposal, likely to benefit millions of young families, will form the centrepiece of the Tory election manifesto.”

Never mind that – as Left Foot Forward has shown – that the policy will do absolutely nothing for the majority of people who are unmarried, widowed or divorced; will favour rich over poor; and penalises young people, their mooted announcement leaves a substantial question mark over their commitment to fiscal responsibility.

In the Budget, the Government set out how it would reduce the deficit by 2013/14 through £19 billion of costed tax rises (including the NI rise) and £38 billion in spending cuts (more than half costed including painful cuts to Higher Education). Before the married tax break proposal has even been included, the Institute for Fiscal Studies has estimated a blackhole in the Tory plans worth “roughly £4 billion of tax increases and £14 billion of spending cuts.”

The IFS went on to say:

“Using the bulk of these [efficiency saving] 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.”

No-one knows where the axe will fall or whether, as Ed Balls suggests today, VAT will have to rise. The only truth is that the Tories will enter the general election with less clarity around their spending plans than Labour.

http://twitter.com/jessica_asato/status/11583230415 Jessica Asato

RT @leftfootfwd: The Tories marriage tax pledge shows they have replaced fiscal responsibility with a pre-election giveaway http://bit.ly/dAyQE6
http://www.jmedwards.net Jamie Edwards

“The only party proposing a cut in public spending is the Conservative party” Gordon Brown, 2009 #pmqs #changewesee
Mr. Sensible

Will, the gaps in their numbers you highlight with the pledge on NI and married couples allowance are just the tip of the iceburg; what about Inheritance Tax, Corporation tax, and in the long run wanting to scrap the top rate of income tax? Not to mention Osborne’s call for a freeze in council tax, seemingly oblivious to the effect that’s having here in Nottinghamshire.

But, against that, David Cameron did get 1 thing right; ‘If you want to know what a Conservative government would be like, look at our councils’ or something to that effect.
Richard T

If you add on the billion pound commitment to Equitable Life policy holders, the insane open ended commitment to overrule NICE (thus opening up a bottomless pit of expenditure on new drugs and plenty money for big pharma) and the inheritance tax there’s not much to save particularly when at the same time public sector jobs are being slashed. The Tories are being very quiet about how they’ll do this – my bet is a recruitment freeze which will of course get rid of the people doing the essential work because staff turnover is highest at the lower end of the scale. If they try to cut in any other way the cost of redundancy and early retiral will soak up their savings so it will be the power paid who’ll be hit. No change there.
Robert

I know what a Tory Birmingham council is like.

Hundreds of thousands of pounds were spent on consultants looking at an underground railway that everybody knew would never happen as the first of their bright ideas.

Then about as much moving a statue around the city before eventually putting it back where it came from.

At a different level, Birmingham Tories presided over the death by starvation of toddler Khyra Ishaq. Yes – a serious case review enquiry is awaited imminently but as yet no senior official or politician has accepted any responsibility or faced discipline as far as anybody knows.

The children and families of Birmingham deserve better from its council than this.

Britain does not deserve a Tory government.
Will Straw

Thanks for the comments.

Mr Sensible, Richard T – You’re quite right to point out the Tories’ other spending commitments although some of them are costed. For example, they want to pay for the corporate tax cuts by slashing capital allowances. This is foolish but, to be fair to them, not fiscally irresponsible. Labour published a dossier last week identifying a £22bn hole in their spending plans. I should have been clearer but my piece (on NI, the missing £1bn on tax credits & CTF, and the marriage tax plans) was meant to represent new holes. Equitable Life and the NICE commitment should certainly be added to that list.

Jamie – I’ve always been of the view that Brown’s approach last summer was wrong. But he has now listened to his colleagues advice and has a policy which says (i) no deficit reduction until the recover is secure, (ii) tax rises as well as spending cuts have to plug the gap, and (iii) we’ll set how we will manage two-thirds of the reduction before the election. From the Tories we have (i) deficit reduction at any cost, (ii) irresponsible tax cuts (presumably to be paid for by deeper than necessary spending cuts), and (iii) very little clarity before the election on how they will bring down the deficit faster. From occupying the moral high ground on fiscal responsibility they have run down the hill so quickly that they risk tripping and falling flat on their face.
Henry

The Toryish think tank Reform have already suggested that VAT be expanded to include things like food & childrens’ clothing. Of course, as in 1979, the Tories will deny that they plan to increase or expand VAT till after the election.
http://www.leftfootforward.org/2010/04/cynical-tories-will-take-from-poor-to-buy-votes-of-better-off/ Cynical Tories will take from poor to buy votes of better off | Left Foot Forward

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