Tuesday, August 29, 2006

Practice what you preach, Gordon Brown

Gordon Brown is in the Financial Times today, preaching, among other things, about the folly of 'unfunded tax cuts'. No doubt, that particular comment was aimed at those who have been going around talking about abolishing inheritance tax and stamp duty on shares.

His article reads like a traditional Brown budget. Start off by telling us all of the dire economic situation in the world, then point out how, in spite of all these tribulations, Britain has stood firm. Remind us of his one spectacular decision; granting independence to the Bank of England. Throw in the following words: stability (preferably 'locked in'), public investment (now there's a euphemism). He hasn't treated us to a deluge of figures and percentages, so for that, I am grateful.

I agree with Gordon Brown about unfunded and uncosted tax cuts. We should only cut taxes when we have a clear idea of the figures involved, and the likely impact. This is common sense. However, I don't think anyone has been making rash promises to cut taxes.

My question, however, is this: why do we hear about the virtues of 'funding' or 'costing' measures, only when they relate to tax cuts? What about all the tax rises, stealth taxes, etc? Does anyone research them beforehand to see if they are in fact necessary? I remember a few years ago, we were presented with all sorts of figures when the Government wanted to increase the national insurance contributions rate. Perhaps because they were making the case that the increase was necessary to pay for the NHS, they felt the need to come up with all sorts of justifications, etc. However, we generally just get hit with tax rise after tax rise with nobody bothering to explain the 'costings'.

As Chancellor of the Exchequer, Gordon Brown has presided over so many tax blunders. For him to start preaching to us about stability and proper planning in tax policy is nothing short of laughable.

Here are a few examples of Brown At Work:

  • Abolition of the dividend tax credit in 1997 which plunged pension funds into their current crisis, forcing many final-salary schemes to close;
  • The tax credits fiasco, which has resulted in overpayments of £1.3bn for two years running (perhaps some of this money could help cover some of the shortfall from the abolition of inheritance tax);
  • The introduction of the 0 per cent small companies rate. Gordon Brown had obviously not foreseen how this would work in practice. The rule was then revised 'to counter avoidance' before being withdrawn altogether. All in a period of four years.

Yes, tax cuts must be funded and costed. But tax policy must also be planned. There must be certainty for both the taxpayer and the tax collector. There is not much evidence of that in a Brown-controlled Treasury, so please forgive me for not taking his latest comments too seriously.
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