Cameron’s ‘bare-knuckle fight’ lacks punch

He may have warned of a 'bare-knuckle fight with the government' over the future of district general hospitals. But for all the tough talk, the Conservatives plans on taxation remain decidedly timid.

"I can promise what I've called a bare-knuckle fight with the Government over the future of district general hospitals," said David Cameron recently. Tough talk by the challenger, but the tax plan that the Tories unveiled last week has not exactly put his party on the front foot. The main thrust of the Tory's tax policy report, fronted by Thatcherite John Redwood, was to abolish inheritance tax on housing. Many have described the move as a bid to curry favour with middle England as more and more middle-class families have been hit by the tax over the last decade due to the steep run-up in housing prices.

Under the proposal, a person's main residence would be liable to a reshaped capital-gains tax, which would bring in £1.4bn to compensate for the loss of tax revenue. But as a statement of intent, it wasn't exactly earth-shattering. As Dominic Lawson notes in The Independent, the £4bn raised by inheritance tax accounts for less than 1% of the Exchequer's total annual revenues. And the Tory's proposed plans to reduce stamp duty on shares and property won't knock the wind out of Gordon Brown's sails either. Cameron will have to go much further to achieve the "low tax, low regulation, competitive enterprise economy" promised in Redwood's report.

Cameron's first problem is that he seems to subscribe to the notion that the overall balance between spending and taxation that has been introduced by Gordon Brown is unchangeable, says Lawson. Yet he could certainly do away with some of the 883 quangos that keep the bureaucratic class in pocket, costing taxpayers a massive £167.5bn a year. When New Labour first came to office, that figure stood at £24.1bn. The Milk Development Council, for example, charged with spreading the debatable health benefits of milk, employs eight times as many people as it did in 1998, says Alasdair Palmer in The Daily Telegraph. It seems Labour's only solution to bungling state officials is more state officials. "So be brave, be ambitious," urges Tim Worstall in The Times. "Kill a quango today."

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The second problem with Cameron's tax policy is that it contributes to the "appallingly ignorant delusion" that the economy is like a cake, says Lawson. Just because one person gets a bigger slice it doesn't mean that someone else is getting a smaller slice. Lowering taxes in Ireland at the end of the 1980s, for example, proved a major factor in stoking the economic prosperity that followed over the next decade. Lowering corporation taxes to 10% brought in the American multinationals and cutting income tax led to a burst in consumer spending.

"Where's the sense of ambition?" agrees Worstall. National insurance and VAT raised £88bn and £77bn respectively last year "either can go". The Tories could also do with finding a way to cut corporation-tax rates to back their claims of making Britain a competitive economy. But if that's a bit too radical, Cameron would do well to remember PJ O'Rourke's Law of Circumcision: you can take 10% off the top of absolutely anything.