Nick Clegg responds to Comment Central on tax

Nick Clegg, who has gone out front on tax cuts, asked for the chance to intervene in the tax debate that has been sparked by Comment Central.

I was delighted to offer him the space. Here are his remarks:

I’m not sure I’ve ever been called a “punk tax cutter” before. I quite like the label, though I don't think it was meant to be a compliment.

Either way, Danny Finklestein is wrong, and cutting taxes is right, and here are some reasons why:

Danny thinks that offering people on low and middle incomes a tax cut is a ‘con’- a short term promise intended to fool voters. I doubt the hundreds of millions of Americans who voted for Barack Obama's pledge to deliver fair tax cuts paid for by the very wealthy would agree. And I think UK taxpayers feel the same.

Danny's informal role as a chief strategist for the Tories is messing up his judgement as a public commentator. He's so concerned to stop the Tories having a civil war on tax that he ends up recommending an economic policy of pure massochism. Higher taxes at a time of recession would be madness. Growth is what we need now. Funded tax cuts help give us that.

Without growth there's no earthly way we'll be able to balance the books over the economic cycle. Far from being irresponsible, as Danny alleges, tax cuts at a time of recession is the responsible thing to do. No wonder august papers such as the FT and the Economist are now coming round to our view, as are many eminent economists. 

Of course, not all tax cuts help the wider economy. The Tory inheritance tax cut for millionaires isn’t just unfair. As any GCSE economics student will confirm, the vast majority of people on high incomes simply pocket tax cuts in savings. Tax cuts for people who are really feeling the pinch, by contrast, lead to increased consumer spending on the high street. 

We would cut the basic rate of income tax by 4p (that's an extra 1000 quid per year for someone on 30k) by ending the tax relief on pensions for top earners, upping green taxation and charging capital gains as income. Straightforward, costed and workable.

But I want to go further. More fair tax cuts for people who really need help. Where’s the money to pay for it? How about redirecting spending from the NHS computer systems that never see the light of day; surveillance databases that make us the most spied upon nation in the world; and pointless ID cards that won’t help catch criminals? By the time we’re fighting a general election we will have identified £20bn of mis-spent money. No vague gestures at ‘red tape’ – we’ll let people know exactly what current spending we’re redirecting. And then we'll explain how we think that money should be spent on our public spending priorities instead – like children, housing, the elderly - with any money left over going on further fair tax cuts.

Why does Danny think it's impossible after a decade of spiralling Whitehall spending to find 3% of that money that could be put to a better use? That's what Gordon Brown says - the Government knows best, and the rest of us are not allowed to question the way he spends our money. If Danny won't breathe a word of criticism at Cameron's non existent tax 'n spend policies, surely he can raise a little more resistance to Brown's top down Whitehall spending plans? 

Finally, there's the most disingenuous excuse of all - other parties can't promise fair tax cuts, Danny says, because they'll be subject to too much media scrutiny.

Eh?

Maybe Danny has the searing scrutiny applied to George Osborne's council tax "freeze" in mind - paid for in service cuts by local authorities. Or the microscopic examination applied to tax cuts which only benefit the richest 6% of the population - the effect of the Tory IHT proposal.

Come off it, Danny - Tory policy proposals have elevated vacuity, largely unchallenged by the media, to an art form.

But this isn't about the media. It is about being clear and bold on what is needed at a time of growing economic distress. I may have failed to persuade Danny, but I suspect time will prove me right.

I will reply later.

UPDATE: Nick's piece intercut with my reply can now be found here.

Comments

[Louise]

He's right, inasmuch I haven't heard a concrete proposal from the Tories for weeks. I know Clegg can afford to be a "punk tax-cutter" at 15% in the polls, but I do think the more the Tories prevaricate on what they want to stand for at the next election, the more Labour are able to make the weather by steering their own initiatives - good or bad - through Parliament.

I remain a strong Tory supporter but Cameron and Osborne are going to have to really shock me tomorrow if they want to keep my actual vote or get any of my help at the next election.

[Simon]

Danny- what can you actually promise before an election then? And if you borrow to give tax cuts, isn't this a good one-off fiscal shot in the arm for an economy which needs it? The amount of housing wealth lost from the economy is huge and a proportion of that is always used for consumption. Therefore, the amount of consumption that has gone out of the economy would have been enough for a severe recession without the credit crunch piled on top. Interest rates can only do so much, so now we need a real fiscal reaction- why not cancel unnecessary government spending, borrow some more and give some tax cuts to those that need it most too? Osbourne and cameron are all over the shop.