George Osborne during a visit to the Royal Mint on March 25, 2014 in Llantrisant, Wales. Photograph: Getty Images.
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Osborne's new tax cutting agenda could mean even bigger spending cuts

The Chancellor's new assumption that tax cuts significantly boost growth could result in a higher than expected deficit. 

For years, George Osborne has opposed what he describes as "unfunded tax cuts": those that are not paid for by a tax rise or a spending cut elsewhere. As recently as February 2013, he told the US-based Manhattan Institute:

I am more of a Thatcherite than a Reaganite when it comes to tax policy...I'm a fiscal conservative and I don't want to take risks with my public finances on an assumption that we are at some point in the Laffer curve. What I would say is let's see the proof in the pudding, in other words. I'm a low tax conservative, I want to reduce taxes but I basically think you have to do the hard work of reducing the cost of government to pay for those lower taxes.

It is a stance that has long dismayed his party's Lafferites. But in a break with his past position, Osborne has now embraced "dynamic scoring": a model favoured by the US right which purports to measure the full effect of tax cuts on the economy, rather than merely the "static" cost to the Treasury. The aim is to demonstrate that tax cuts are possible even in times of fiscal constraint (the deficit was forecast to be £108bn in 2013-14) due to the beneficial impact that they have on growth.

Osborne will today publish new Treasury research suggesting that the 20 per cent real-terms reduction in fuel duty since 2011 is likely to generate enough growth to cover around half of the lost revenue (having previously published a similar study on corporation tax). According to the paper, tax cuts of this level will boost output by up to 0.5 per cent of GDP (£7.5bn) over the next two decades by encouraging people to drive more and stimulating consumption and investment. During his recent appearance at the Treasury select committee, Osborne said: "I’m not expecting some overnight change in the way Parliament and the Treasury does public finances but I think it will start this quiet revolution where people come to realise that if you leave more money in people’s pockets they tend to be better at spending it and investing it than government."

But among those sceptical of Osborne's "quiet revolution" is the Office for Budget Responsibility, the fiscal watchdog he founded in 2010, which has steadfastly refused to embrace the model. This is because, as the FT's Chris Giles notes, the Treasury research relies on some generous assumptions. For instance, "that the cost of the fuel duty cuts not offset by other increased revenues is paid for by the imposition of a pure poll tax, paid equally by every household regardless of income."

As Giles notes, "Had the Treasury used more realistic offsetting tax increases, its results would show the fuel tax cuts raised growth by less and the offsetting revenue growth would have been smaller." In addition, the research ignores the negative economic effects of cutting fuel duty such as increased congestion and pollution on the grounds that they are too difficult to measure. 

It's for this reason that the oracle of economics, the Institute for Fiscal Studies, warns that "You have to wait 20 years before you get the full response if the model is correct. Clearly there are risks there and a lot of uncertainties". The danger is that Osborne, seeking to woo the Conservative right (whose support he will need in any future leadership contest), banks the anticipated revenue from the fuel duty tax cuts, leaving the government exposed if it fails to materialise. And should the deficit prove larger than expected, there is little doubt that the Chancellor will rely on spending cuts, rather than tax increases (which he has promised to avoid), to plug the gap. 

George Eaton is political editor of the New Statesman.

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The Women's March against Trump matters – but only if we keep fighting

We won’t win the battle for progressive ideas if we don’t battle in the first place.

Arron Banks, UKIP-funder, Brexit cheerleader and Gibraltar-based insurance salesman, took time out from Trump's inauguration to tweet me about my role in tomorrow's Women’s March Conservative values are in the ascendancy worldwide. Thankfully your values are finished. . . good”.

Just what about the idea of women and men marching for human rights causes such ill will? The sense it is somehow cheeky to say we will champion equality whoever is in office in America or around the world. After all, if progressives like me have lost the battle of ideas, what difference does it make whether we are marching, holding meetings or just moaning on the internet?

The only anti-democratic perspective is to argue that when someone has lost the argument they have to stop making one. When political parties lose elections they reflect, they listen, they learn but if they stand for something, they don’t disband. The same is true, now, for the broader context. We should not dismiss the necessity to learn, to listen, to reflect on the rise of Trump – or indeed reflect on the rise of the right in the UK  but reject the idea that we have to take a vow of silence if we want to win power again.

To march is not to ignore the challenges progressives face. It is to start to ask what are we prepared to do about it.

Historically, conservatives have had no such qualms about regrouping and remaining steadfast in the confidence they have something worth saying. In contrast, the left has always been good at absolving itself of the need to renew.

We spend our time seeking the perfect candidates, the perfect policy, the perfect campaign, as a precondition for action. It justifies doing nothing except sitting on the sidelines bemoaning the state of society.

We also seem to think that changing the world should be easier than reality suggests. The backlash we are now seeing against progressive policies was inevitable once we appeared to take these gains for granted and became arrogant and exclusive about the inevitability of our worldview. Our values demand the rebalancing of power, whether economic, social or cultural, and that means challenging those who currently have it. We may believe that a more equal world is one in which more will thrive, but that doesn’t mean those with entrenched privilege will give up their favoured status without a fight or that the public should express perpetual gratitude for our efforts via the ballot box either.  

Amongst the conferences, tweets and general rumblings there seem three schools of thought about what to do next. The first is Marxist  as in Groucho revisionism: to rise again we must water down our principles to accommodate where we believe the centre ground of politics to now be. Tone down our ideals in the hope that by such acquiescence we can eventually win back public support for our brand – if not our purpose. The very essence of a hollow victory.

The second is to stick to our guns and stick our heads in the sand, believing that eventually, when World War Three breaks out, the public will come grovelling back to us. To luxuriate in an unwillingness to see we are losing not just elected offices but the fight for our shared future.

But what if there really was a third way? It's not going to be easy, and it requires more than a hashtag or funny t-shirt. It’s about picking ourselves up, dusting ourselves down and starting to renew our call to arms in a way that makes sense for the modern world.

For the avoidance of doubt, if we march tomorrow and then go home satisfied we have made our point then we may as well not have marched at all. But if we march and continue to organise out of the networks we make, well, then that’s worth a Saturday in the cold. After all, we won’t win the battle of ideas, if we don’t battle.

We do have to change the way we work. We do have to have the courage not to live in our echo chambers alone. To go with respect and humility to debate and discuss the future of our communities and of our country.

And we have to come together to show there is a willingness not to ask a few brave souls to do that on their own. Not just at election times, but every day and in every corner of Britain, no matter how difficult it may feel.

Saturday is one part of that process of finding others willing not just to walk a mile with a placard, but to put in the hard yards to win the argument again for progressive values and vision. Maybe no one will show up. Maybe not many will keep going. But whilst there are folk with faith in each other, and in that alternative future, they’ll find a friend in me ready to work with them and will them on  and then Mr Banks really should be worried.