Nick Clegg vs Daniel Finkelstein on tax

Seconds out, round two. Nick Clegg has a piece over on Comment Central, taking Danny Finkelstein to task over tax policy and laying out the Liberal Democrat approach:

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.