Political

Welcome to tax and spend politics, 1992 style

Unpopular government seeks fourth general election victory in a row in midst of a recession. Sound familiar? Welcome to 1992.

Back then it was the Conservatives in power facing a Labour opposition and David Cameron was working for the Conservative Party, as head of the political section of the Conservative Research Department.

I suspect it’s memories of 1992 that help explain the vagueness of Conservative tax and spend plans this time round. In 1992 the Labour opposition had spelt out its spending commitments in advance in some detail and so, when Chancellor of the Exchequer Norman Lamont sprung a surprise in the spring 1992 budget, their plans came unstuck.

Lamont introduced a new 20p rate of income tax for the first £2,000 of taxable income, a measure which helped the low paid (as Gordon Brown was reminded to his cost years later with his botched abolition of its successor). This new rate boxed in Labour because, with spending commitments largely fixed and their own need to demonstrate economic credibility meaning Neil Kinnock wouldn’t countenance an increase in their budgeted deficit, Labour either had to come out against this tax cut or drop their own planned surprise (a 1% cut in national insurance contributions). In order to avoid being seen as opposing a tax cut for the low paid, Labour therefore dropped its tax cut to appeal to the middle classes.

Gordon Brown and Alistair Darling would appear to be trying to box the Conservatives in this time in reverse fashion, though this time the implement of choice is tax rises rather than cuts. However, with neither firm budget deficit commitments in the short term nor detailed spending commitments from the Conservatives so far, Brown and Darling are left trying to box in the Conservatives, but with only one side of the box. All makes for rather frantic waving around, but not much boxing in.

One ironic footnote: in order to make the Conservative government’s sums add up clearly enough to ensure they had a firm base from which to attack Labour’s tax and spend policies, Norman Lamont insisted on several manifesto ideas being dropped. What was one of them? Axing inheritance tax.

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