It now seems that Labour and the Tories are willing to follow the Lib Dem lead on tax cuts for low- and middle-income earners. Yesterday’s papers had news that Brown & Darling are preparing a range of cuts for possible inclusion in the forthcoming pre-Budget report. And today’s Telegraph reveals that Cameron & Co. are now lining up a preemptive tax cut of their own.
There are strong moral, fiscal and political arguments in favour of targeted tax cuts, so – on paper, at least – it’s A Good Thing that all three main parties have hit on the same position. But dividing lines remain, and they should ensure that this situation reduces into a tax war rather than a new consensus. Chief among them is the way in which the tax cuts will be funded. Word is that Brown will fund his measures through extra borrowing – whereas the Tories and the Lib Dems would take the more sensible route of paying for them by cutting back on government waste. That means the opposition parties can major on the “mountain of debt” attack, as Cameron does in his article for the News of the World today.
But here’s where the Tories’ indecision and incoherency of the past few weeks may cost them dear. Because they haven’t successfully pressed the case for waste-funded tax cuts already, Brown’s approach will be treated with less public scepticism than it otherwise would have been. And those attacks on government debt – whilst right in content and tone – will have less traction once Brown’s promising both higher public spending and lower taxes. Our PM’s trying to have his fiscal cake and eat it. In this instance, the Tories may be too late to stop him.
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