Magazine article Public Finance

Taxation and Representation

Magazine article Public Finance

Taxation and Representation

Article excerpt

Is public spending going out of fashion? There is certainly a growing sense at Westminster, particularly among Conservatives, that we might have passed the high-water mark of voters' support for public expenditure.

Even the Tories were taken by surprise by the big swing towards them in the opinion polls that followed the shadow chancellor's promise of tax cuts.

Up until this point, the party under David Cameron had been keen to distance itself from its old image as a tax-cutting, low public spending party. It had even gone as far as to steal Labour's trick of promising to stick to the current government's spending limits if elected, in an attempt to show that the Conservative Party wouldn't slash spending on schools and hospitals as soon as it got into office.

Labour backbenchers are angry and nervous that the new prime minister and those who surround him in Number 10 might share this view. Rather than choose to stand and defend the principle of public spending and the taxation that is required to pay for it, the chancellor, presumably with Gordon Brown's blessing, chose instead to try and match the proposed Conservative tax cuts with some of his own.

This has caused a backlash, with one centre-Left commentator referring to the Pre-Budget Report as marking the 'death of social democracy'.

On the other side of the political fence, the poll swing has given Right-wingers the impetus to urge the Tory party to return to its core belief in tax cuts and small government. They argue that the consensus that Labour believed it had built up in favour of active, high-spending government is more illusory than real.

On this view, public pessimism about whether services are likely to improve and frequent stories about wasted public money have shaken voters' belief in the ability of government to make a difference. The time is ripe, they argue, for a return to Thatcherite Conservatism with an emphasis on the market, rather than the state, delivering what voters need.

So should George Osborne drop his rather inelegant formula - 'sharing the proceeds of growth' - on the basis that he no longer needs to convince the electorate that the Conservatives will not cut spending? And should Labour backbenchers resign themselves to another two years of tax cuts?

Both would be premature, for four reasons.

First, there is little reason to suppose that the general public's attitude towards inheritance tax applies to all taxes. Inheritance tax is widely seen as unfair largely because it invades a very private relationship - that between parent and child. …

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