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Crowd pleasing

• Nick
• 2 Oct 06, 01:01 PM

Royal Bath Hotel, Bournemouth: I'm watching a fringe meeting in which the Chingford Skinhead (Norman Tebbit to you) has wowed his audience with a plea for tax cuts paid for - in part - by leaving the EU. The crowd loved it but so too will David Cameron - he wants an argument to prove that he's on the centre ground.

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FAQ on Cameron and taxes

• Nick
• 2 Oct 06, 11:14 AM

So, why doesn't David Cameron believe in cutting taxes?

Actually, he does

But why's he saying he won't cut taxes then ?

Actually he's not. He says he won't promise uncosted upfront tax cuts. Those words are the key to understanding this. He won't promise tax cuts because he can't be sure of the state of the books and he knows that the public don't believe promises to cut taxes. (See below for the significance of "uncosted" and "upfront".)

Surely the polls show that the public would vote for a party that promised tax cuts?

So, why isn't William Hague or Michael Howard prime minister then? A much quoted ICM poll was used to suggest that people would be more likely to vote Conservative at the next election if they were promised tax cuts. The poll said no such thing. It said that they would be more likely to vote for the party if they believed they would cut taxes. What Hague and Howard found is you can say you'll cut taxes but that doesn't mean that voters believe you.

Meanwhile a put an exaggerated version of the choice facing the Tories at the moment (keep down taxes by cutting waste versus drastically reducing the role of the state) and Cameron's position got pretty overwhelming backing.

The story of all the polling is pretty clear - people do want tax cuts but they don't want cuts in services. They believe - in theory - that you can square the circle by cutting waste and bureaucracy BUT they do not believe anything that looks like a politician's easy promise.

That's why all the parties are beginning to sing similar tunes - Gordon Brown boasts about cutting waste and claims to cut tax rates, and the Lib Dems promise tax cuts and, you guessed it, to cut waste too. That's been the Tory message for the past two elections.

So, the Tories do want to cut taxes but don't want to tell us that now?

You're getting there. The Tories are still fighting to restore their economic credibility after the ERM debacle. They believe that by emphasising their commitment to economic stability and stressing the importance of mortgage rates rather than tax rates they can begin to restore that reputation and re-build trust. Having a fight with the right over being too cautious and centre-ist may help too.

If - and it's a big if - this strategy works then people might just believe any promises they do give later to cut taxes.

So, after all this, the Tories may end up promising to cut taxes at the next election?

Cameron is desperate to "stick to the plan" (as he put it yesterday). He does not want to repeat what Hague and Howard did by producing a plan for specific upfront tax cuts which Gordon Brown can take apart. He wants instead to copy Margaret Thatcher in her first election - promising tax reform, pledging to cut taxes if possible but acknowledging that - just as in her first government - taxes could rise overall if the economic situation demands.

Tax reform would allow corporate and personal tax cuts to be paid for by increases in green taxes. These would not be uncosted (the last of Cameron's important three words about tax).

So, the Right must be furious?

No. They know what Cameron's up to and they trust his instincts as a taxcutter. (Listen to John Redwood on the Today programme or Lord Blackwell of the Centre for Policy Studies on today's World at One.)

They think that he's being too cautious and that he should lead the argument in favour of the economic benefits and moral arguments for tax cuts. So, they'll keep up the pressure and the thinking about how it's done. The real argument will come some months or years down the line about what how specific their next manifesto should be.

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