Osborne said the large amount of borrowing by the country makes tax cuts unaffordable and stressed stability was the overriding concern. The economy is one of the few areas where Labour is still way ahead in the polls and the Tories will have to work as hard as the Labour Party did in the mid-nineties to convince the electorate they are a safe pair of economic hands.
Osborne also used a speech in Manchester this week to declare he would take on vested interests that support tax reliefs and tax breaks with a ‘radical overhaul’ required to address the complexity of the current system that is undermining UK competitiveness.
He is unlikely to resurrect calls for a flat-tax but the work of his tax reform group, led by Thatcherite former MP Michael Forsyth, could be an interesting alternative to the Government’s better regulation taskforce agenda aimed at cutting red tape.
Business leaders have been receptive to Osborne’s vision of exchanging certain tax perks for a simpler system but he will not yet comment on specific reliefs that would be axed.
The Social Market Foundation thinktank this week claimed NPSS auto-enrolment will remove the need for many tax incentives to save- with savings then targeted at low income families and SMEs- and the Tory proposals could put fundamental reform of the pension tax system back on the political agenda.
The rightwing Cornerstone group of Tory MPs launched a counter offensive against Tory rebranding calling on Cameron to spend less time with ‘the pseuds and posers of London’s chichi set’, but with the momentum Cameron and Osborne are developing its looks unlikely they will pay much attention to such dissent.
The Government’s tax credits system got yet another bashing this week after new figures showed overpayments totalling nearly 4bn in the last four years.
LibDem Shadow Work and Pensions Secretary David Laws called for Paymaster General Dawn Primarolo to be sacked and a major overhaul of the way credits are administered.
Former welfare minister Frank Field also laid a boot in claiming the credits are the bluntest of anti-poverty weapons and ‘the equivalent of attempting delicate key hole surgery with a hacksaw’.
With the prospect of means tested pension credit still applying in some form for around a third of pensioners- at the Government’s most optimistic forecast- questions will again be asked as to whether far more should have been put in the White Paper to drastically simplify benefits in this area.