It is morally right to leave families with more of their hard earned income in their pockets rather than in the state coffers. It also makes complete economic sense. It is a fact that low tax societies expand whilst high tax societies contract. It is a mistake to argue that economic stability should come before tax cuts. There is no connection between these statements. Lower tax rates lead to growth and economic stability. It also inspires and leads to innovation.
An entrepreneur running his small business who wants to provide for his children doesn’t want to see his estate devoured by a 40% death tax. The removal of death duties is an incentive for the small businessman to work harder. Whereas the current system of inheritance tax deters the building up of wealth as so much of it is eaten up by taxation before it can be passed on to one’s family.
It is therefore not surprising that the Conservative Party’s policy to effectively remove most families from Inheritance Tax is a clear example of a tax cutting promise which excites and pleases the people of our country.
We should not imply that tax cuts are an afterthought, something we would like to do if the circumstances permit. This approach accepts the facile argument that a tax rate reduction leads inevitably to the cut in money available for public services. We must argue with spirit that tax reductions will lead to an expanding economy and more revenue available to the Government for public expenditure or reductions in Government borrowing. We must explain time and time again that Government revenues are a combination of tax rates, economic activity, borrowing and the level of avoidance or evasion of taxation.
We need of course to stress what extra revenues are brought in by just a small amount of growth in the economy. At current tax rates £6 billion for just 1% more growth. By reducing business taxes you will get more economic growth and you can get more revenue, not less.
It is important to emphasise the individual moral merits of each tax rate cut. Increasing the threshold before the 40% income tax rate kicks in would inspire more businessmen and young professionals. But it would also reward senior public servants such as headteachers and members of the medical profession.
I strongly believe that we should identify areas of public expenditure which are unnecessary such as identity cards, local government Standards Boards and regional government all of which could be abolished. Equally we should stress areas of public expenditure which are clearly operating in an inefficient and unfair manner. An example of this would be the Tax Credits system which is extremely complex, costly and in need of urgent reform. We must promise to reform these areas of public expenditure in a simple way and in a way that is believed by the electorate.
The slogan ‘elect us, we’ll run things better than the other lot’ may win us an election but will not inspire the nation. The slogan ‘elect us, we will cut taxes, reform public services and give you and your family a better standard of living and a higher quality of life’ may be more risky and may be more difficult to promote but win an election with that promise and you will inspire a whole generation.