The Guardian view on Conservative tax plans: this law would be an ass

http://www.theguardian.com/commentisfree/2015/apr/29/guardian-view-conservative-tax-plans-law-ass

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The Conservative party trades on its responsible approach to finance. “With economic instability abroad, now is worst time to vote for instability at home,” George Osborne tweeted today as the US economy stalled. Yet the so called five-year tax lock which the Tory party unveiled today is the very opposite of responsible. It generates a built-in element of instability if the economy is hit by a further storm. It also encapsulates a lot of the reasons why Conservative economic claims have struggled to break through and win voters’ trust.

No one can see into the future. So a responsible chancellor ought to be duty-bound to keep options open, to be able to respond to events and adapt to unexpected changes in the economy, not close them off. Instead, the Conservatives are now committed to tying their hands behind their back, placing the taxes that provide roughly two-thirds of all government income – income tax, national insurance and VAT – wholly off-limits, come what may, for five years. This is madness.

The madness takes many forms. It is two weeks since the Conservatives made the same pledges in their manifesto. “We commit to no increases in VAT, income tax or national insurance,” it said on page nine. Now they have gone further in two ways. First, they have broadened the VAT pledge by committing not to extend the tax’s scope as well as the rate. That could be foolish, because it rules out extending VAT to new products and services coming on to the market between now and 2020. But, second, they propose to put the pledges into law.

There are several objections to that. Any serious commitment to new legislation ought properly to have been in the manifesto. This one wasn’t. Instead it looks as if it has been dreamed up to change the subject after the UK’s modest growth figure cast a big shadow over those claims of competence. In reality, it is a spur-of-the-moment campaign gesture, not a serious commitment.

Laws require parliamentary time too, so this new commitment, if it was serious, would use Commons time merely to ensure that a government will do what it has already said it would do. That’s not a very good sign of trustworthiness. And most laws also contain a sanction if they are broken – fines, penalties, even imprisonment. But this law is unenforceable. Who will be prosecuted if the next chancellor increases VAT to damp down a spending boom? Will Mr Osborne be sent to Dartmoor if taxes have to rise before 2020? Of course not. This law is an ass.

To be fair, the Conservatives have no monopoly of asininity. Labour was also drawn to meaningless legislation whose purpose was more to embarrass the opposition than to make proper use of the statute book. Gordon Brown’s Fiscal Responsibility Act of 2010 set deficit targets that Labour had no means of ensuring would be met (and have not been met). The Child Poverty Act of the same year solemnly legislated to get rid of the poverty in its title by 2020.

But the coalition has been just as drawn to campaigning by legislation. The 0.7% of gross national income spending target on international development, a wholly worthy policy, is now enshrined in a law which is essentially a gesture, albeit a good one. Mr Osborne’s attempt last winter to put his charter of budget responsibility into law was a Tory version of gestural Brownism, using parliamentary time to strike an attitude rather than to legislate seriously. Britain needs a law to get rid of aspirational legislation, not the kind of bill floated by the Tories today.

In the end, though, it is the policy itself, not the waste of parliament’s time or the demeaning of politics, that matters more. Ruling out increases in the three most important sources of government income may be principally designed to put Labour on the spot. But its sharp-end effect, as night follows day, would be that spending must be cut to achieve the surplus to which the government is also committed (though not yet in statute) by 2019. Some of the harsh realities were spelled out by the Institute for Fiscal Studies this week: abolition of child benefit, a 10% cut in housing benefit, taxing disability benefits, a large cut in means-tested benefits for children. It is truly draconian stuff, but it is not – surprise, surprise – set out in the Conservative manifesto.