The Economy

Building A Strong Economy

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| Tax - A Conservative Approach | What's Wrong with Labour's Approach to Tax? | Gordon Brown's 80 Tax Rises | The Impact of Gordon Brown's Tax Rises on Low Income Families | A Conservative Alternative - Tax Cuts for Low Earners |

Tax

Tax - A Conservative Approach

In order to both provide full employment and pay for the public services we cherish and achieve the sort of economic growth and prosperity that will enable Britain to play its full part in the world - Britain needs a low tax economy.

Low taxes mean higher investment in industry

Higher investment means more jobs

More jobs means more people earning more money

More people earning more money - means that the total amount of tax revenue the government receives actually increases.....

even though the percentage of tax that individuals pay has decreased.

(and what's more - ordinary people have more money in their pockets too - so they spend more - so companies sell more - so they take on more workers - who then earn more... the total of amount of tax revenues the government receives increases still further ...more employment, more government tax revenue to spend on public services - and maybe even cut taxes a bit to stimulate even more economic growth, and more money in people's pockets...)

Where this approach has been used in other western countries - they have experienced economic growth. It's not actually rocket science - just 'good economics'!

What's Wrong with Labour's Approach to Tax?

But Labour's approach has been to increase tax - by a huge amount - not in an open way through income tax - but by 'stealth taxes' - imposing new taxes on things we have to buy house and car insurance; by not moving up the starting point for paying tax in line with price increases - so that now virtually everyone has to pay at least 1% of the price of their new house in stamp duty; or by setting tax as a percentage of purchase price - like the 70% tax on petrol - which Gordon Brown refused to reduce when world oil prices soared massively recently - so we all had to pay large amounts of extra tax on top of the petrol price rises caused by the world oil market; or by passing laws that give local councils huge amounts of extra duties - but not providing anything like enough central government money for council so we all have to pay for them by increases in council tax; or by cutting the amount of central government funding for local councils (which normally makes up 75% of local council funding) so that local council's had to foot the bill with yet more increases in council tax...

That's why Britain has now fallen economically behind The Republic of Ireland - which twenty years ago was an economic backwater - then they cut taxes which led to sustained high level economic growth. Meanwhile, Gordon Brown, who has been Chancellor of the Exchequer since Labour came to power in 1997 - has year after year - repeatedly raised taxes in Britain. No wonder the UK has now been overtaken by former economic backwater countries like Ireland - it's not rocket science - just 'good economics'!

Gordon Brown's 80 Tax rises (and Labour are still thinking up new ones!)

1997

1. Council tax increased by 6.5pc

2. Mortgage tax relief cut

3. Pensions tax

4. Health insurance taxed

5. Health insurance taxed again

6. Fuel tax escalator up

7. Vehicle excise duty up

8. Tobacco duty escalator up

9. Stamp duty up for properties over £250,000

10. Corporation tax changes

11. New windfall tax on utilities

1998

12. Married couples' allowance cut

13. Tax on travel insurance up

14. Tax on casinos and gaming machines up

15. Fuel tax escalator brought forward

16. Tax on company cars up

17. Tax relief for foreign earnings abolished

18. Tax concession for certain professions abolished

19. Capital gains tax imposed on certain non-residents

20. Reinvestment relief restricted

21. Corporation tax payments brought forward

22 Higher stamp duty rates up

23. Some hydrocarbon duties up

24. Additional diesel duties

25. Landfill tax up

26. Council tax up by 8.6pc

1999

27. NIC earnings limit raised

28. NICs for self-employed up

29. Married couples' allowance abolished

30. Mortgage tax relief abolished

31. IR35: Taxation of personal services companies

32. Company car business mileage allowances restricted

33. Tobacco duty escalator brought forward

34. Insurance premium tax up

35. Vocational training relief abolished

36. Employer NICs extended to all benefits in kind

37. VAT on some banking services up

38. Premiums paid to tenants by landlords taxed

39. Duty on minor oils up

40. Vehicle excise duties for lorries up

41. Landfill tax escalator introduced

42. Higher rates of stamp duty up again

43. Council tax up by 6.8pc

2000

44. Tobacco duties up

45. Higher rates of stamp duty up again

46. Extra taxation of life assurance companies

47. Rules on controlled foreign companies extended

48. Council tax up by 6.1pc

2001

49. Council tax up by 6.4pc

2002

50. Personal allowances frozen

51. National Insurance threshold frozen

52. NICs for employers up

53. NICs for employees up

54. NICs for self-employed up

55. North Sea taxation up

56. Tax on some alcoholic drinks up

57. New stamp duty regime

58. New rules on loan relationships

59. Council tax up by 8.2pc

2003

60. VAT on electronically supplied services

61. IR35 applied to domestic workers

62. Betting duty change

63. Tax on red diesel and fuel oil up

64. Controlled foreign companies measures on Ireland

65. Vehicle excise duty up

66. Council tax up by 12.9pc

2004

67. New 19pc tax rate for owner-managed businesses

68. New tax on private use of company vans

69. UK transfer pricing introduced

70. Increase in rate of tax on trusts

71. Increase in tax on red diesel fuel

72. Increase in tax on other road fuels (including LPG)

73. Council tax up by 5.9pc

2005

74. Cancellation of stamp duty land tax relief for disadvantaged areas.

75. North Sea taxation doubled from 10pc to 20pc.

76. Zero per cent rate of corporation tax abolished

77. Council tax up by 4.1pc

2006

78. Clampdown on trusts and insurance policies commonly used to mitigate inheritance tax.

79. Increase in vehicle excise duty for SUVs.

80. Council tax up by 4.5pc

and Labour are still thinking up new taxes - like considering a new tax on seaside bed and Breakfast accommodation that could add 5% or even 10% to the cost of a UK holiday...(Labour's review of local government finance conducted by former Labour councillor Sir Michael Lyons).

The impact of Gordon Brown's tax rises on low income families

Because Gordon Brown has used 'stealth taxes' like these that ordinary voters might not notice - rather than increasing income tax - which everyone would notice - it's those on those on low incomes who suffer most. Currently

* Under Labour the 20% of the working population on the lowest incomes pay on average 38% of their income in tax compared to the national average of 35% (made up of a combination of income tax and 'stealth taxes' - such as VAT on their weekly shopping, house insurance premium tax, car insurance premium tax, petrol tax etc...). So

* When in 2006 Gordon Brown cut in real terms the government grant to local council's - and council tax bills had to rise to fund it ...guess who suffered most?.....those on low incomes...

* When in 1999 Gordon Brown increased tax on insurance policies - including home contents insurance - guess who suffered most?.....those on low incomes...

* When in 2002 Gordon Brown hit them with a double whammy by both freezing the starting point at which National Insurance contributions have to paid - rather than raising it in line with inflation AND at the same time increasing the percentage of earnings that has to be paid in national Insurance contributions - guess who suffered most?.....those on low incomes...

* When in Gordon Brown abolished the married couples allowance - guess who suffered most?.....couples on low incomes where they wife stayed at home to look after the children...they ended up having to pay up to £1,000 a year more tax

* and those earning just enough to be able to run a car - also lost out when in Gordon Brown announced substantial increases in car tax.... and then they got hit again by a double whammy - when the world oil price soared so they had to pay not just higher petrol prices to get to work but also more petrol tax...guess what Gordon Brown who was raking in millions of extra pounds in petrol tax refused to reduce it. Example: a car owner paying £20 per week for 25 litres of petrol when petrol was 80p per litre would, when all the taxes on petrol are added up, be paying £16 a week (or £64 a month) in tax. When the price increased to £1-00 a litre the same motorist was paying £25 per week for petrol of which £20 a week (or £80 a month was tax paid to the government...

and others just above really low earnings but still struggling to make ends meet - were hit too:

* When Gordon Brown abolished tax relief on mortgage interest - guess who suffered most?.....young couples struggling to buy their first house - and they are still struggling because Gordon brown abolished tax relief on mortgage interest - as are those whom it prevented even getting on the housing market as house prices have spiralled.

* When in 1997 Gordon Brown imposed a tax on pension funds - which takes £5 billion pounds a year out of the nation's pensions. Why is there a pension's crisis? Well of the £100 billion shortfall in company pensions, £45 billion - that's 45% of the whole problem - is tax that Gordon Brown has taken out of pension funds...

The list could just go on...and on...and on...

Of course Gordon Brown will say that he's set up the tax credit system that gives money back to low income families ....If they fill in an incredibly long and complicated mean's tested application form every six months (which many don't - either because they find it too daunting, don't know about it, or just don't want to tell other people about every little detail of their personal finances). Then if they do get the money - the system Gordon Brown set up is so complicated that there is a fair chance they will be paid the wrong amount of money - and if they've been overpaid - the government will cut their payments leaving them even worse off - some families have actually had to exist on Salvation Army food parcels because the government overpaid them - then claimed the money back - that's a national scandal.

The basic problem is the system that Gordon Brown set up - raising taxes so that low earners pay a percentage of their earnings in tax that is well above the national average - taking money off low earners with one hand - then - after routing that same money through an incredibly bureaucratic process that is incredibly expensive to operate - the government then gives that same money back to those on low incomes - provided they fill in lengthy and detailed means tested application forms twice a year....

Oh and by the way, under the tax and benefit system which Gordon Brown apparently regards as the best thing he has achieved as chancellor, the government takes back 70% (yes seventy percent!) of all extra earnings that those on low incomes earn - in the form of increased tax and reduced benefits. That means that someone on the minimum wage of £5-35 an hour will take home just £1-60 for each extra hour that they work. How can anyone get out of debt, save for a cheap second hand car, holiday or a wedding when the government takes away 70% of everything extra that they earn. Is it any wonder that so many good hard working people have got into debt that they have little hope of repaying?

A Conservative Alternative - Tax Cuts for Low Earners.

..So why not just cut the amount of tax that low earners pay in the first place (and save the country having to pay so much for the incredibly expensive and not very efficient bureaucracy that Gordon Brown has set up!)?

This had been a longstanding Conservative policy. The 2001 Conservative manifesto promised to raise the personal allowance tax threshold (i.e. the amount of money you can earn before you start paying tax) by £2,000. This would have meant a cut in income tax of around 50% for those on the lowest incomes - and would have ended the situation where those earning least pay a higher than average percentage of their income in tax. Labour's approach to helping low earners is to make them pay a higher than average percentage of their income in tax, then give it back to them in means tested benefits. The Conservative approach is to reduce significantly the amount of tax low earners pay. The Conservative approach significantly reduces the poverty trap that Labour's tax and benefit system has created. Raising the tax threshold would help get rid of the 'Poverty Trap' Labour has created and give people an incentive to work hard, improve their lives - and ultimately reduce the amount of benefits that they need. Giving people an incentive to work hard to improve their lives gives them dignity. I believe this is an infinitely better approach than the 'Poverty Trap' system Gordon Brown has created that removes all incentive for people to help themselves because it takes away 70% of all extra income that they earn by means of tax and benefit reductions.