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Tories&#39 tax axe is a persuasive weapon

Coming to the end of the second week of campaigning, what have been the most prominent issues to emerge thus far? Tax? Spending? Health? Education? No, the biggest story to emerge was the marvellous left hook of John Prescott in response to a thrown egg – perhaps the biggest over-reaction seen to date by a leading politician.

The Conservative campaign and manifesto have concentrated on the party&#39s key values and beliefs, defined by the Time for Common Sense slogan.

The principal idea that lies behind all the Tories&#39 pledges and promises is that they want people to be free to choose and they want the Government to become smaller and to meddle less in the lives of citizens.

One of the major pledges in the manifesto is that taxes will be lower by £8bn a year. The party has gone down the route of promising populist tax cuts – some might argue that they are cynical but I would say they are designed to give the electorate tax cuts where they will actually notice them.

Let us not get too carried away with this – it is only 2 per cent of Government spending this year (£390bn rising to £450bn in the next two years if Labour wins). There is ample opportunity for the Tories to be even more radical because, to be frank, £8bn is a pittance. A figure of £20bn a year has been mooted and I, for one, would like them to be more radical and aim for this figure.

The three most important changes in taxation that the Conservatives have announced are the abolition of tax on savings and dividends, the simplification of capital gains tax and the abolition of the need to buy an annuity at 75. These three proposals do the most of any of the three main political parties to encourage people to save.

By abolishing the absurd rule that you have to buy an annuity with your pension pot by the age of 75, you effectively give more freedom to the individual. If you have saved all your life to provide for your own retirement, why should you then have to effectively waste the capital by an arbitrary age? As long you can provide enough to keep off means-tested benefits, you should be able to do what you want with your accumulated capital.

In addition, the Tories will enable younger people to opt out of the basic state pension and have some form of rebate that can be invested. This is the sort of initiative that frees the individual from the nanny state and takes away future dependency.

The next major proposal is concerned with capital gains tax, which is a relatively pointless tax that at the end of the day does not raise that much and is probably fairly easy to avoid. The Tories have said they will simplify CGT and I welcome this. The annual exemption is set at a far too low level – it effectively penalises those individuals attempting to save.

The Tories intend to abolish tax on savings. They should match that with a big increase and a simplification of CGT.

There is very little in the Conservative manifesto that directly affects IFAs. The key points that will have an impact are the tax and pension changes mentioned above.

Finally, a few words on the campaign so far. Dull and unexciting is probably the most accurate phrase but, then again, aren&#39t most election campaigns? The biggest problem is that the election really started in March but was postponed due to the foot and mouth crisis, so everybody became bored with it a long time ago.

The Tories are a long way behind in the opinion polls but voter apathy among Labour supporters and a general feeling that Labour has reneged on its promises at the last election of being purer than pure and getting rid of sleaze could provide the key to Conservative success on election night.


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