It’s time to wield the axe and cut tax

August 23, 2012 1:41 PM

Just 16 per cent of the public trust George Osborne to see the country through the recession, according to an opinion poll by ComRes for ITV. Meanwhile, a survey of business leaders for the Institute of Directors found that 54 per cent thought attempts to reduce taxation have been ‘ineffective’, 62 per cent were critical of attempts to simplify employment law and 68 per cent similarly dismissed attempts to ease the burden of business regulation.

It’s not hard to see why. The Government as a whole and George Osborne in particular have talked about ‘austerity’ and  ‘difficult choices’ so much that it is a common misconception that public sector spending has been cut. It has not. In fact, I wrote yesterday about how spending in July this year was up by 5.1 per cent compared to July 2011.

The rhetoric may be useful in terms of ensuring the public are (more than) fully prepared for the moderation in spending growth that the Government has implemented, and the cuts to specific programmes and bodies that it has undertaken. It may also be useful for calming bond markets and convincing them that the British Government will indeed eventually bring spending down to match tax revenues.  But one thing it is also doing is depressing confidence among people employed in and reliant upon contracts from the public sector.

This would be more than counteracted by the confidence of consumers with more disposable income and businesses with readier access to freed up resources if the rhetoric were backed up with action on spending cuts and the tax cuts they would allow. But consumers are still paying high taxes and businesses are still being priced out of labour, property and product markets due to competition from the public sector, killing off potential growth, jobs and prosperity.

As many are now saying, public spending is rising too far, too fast. It’s time to wield the axe and cut tax, Mr Osborne.Just 16 per cent of the public trust George Osborne to see the country through the recession, according to an opinion poll by ComRes for ITV. Meanwhile, a survey of business leaders for the Institute of Directors found that 54 per cent thought attempts to reduce taxation have been ‘ineffective’, 62 per cent were critical of attempts to simplify employment law and 68 per cent similarly dismissed attempts to ease the burden of business regulation.

It’s not hard to see why. The Government as a whole and George Osborne in particular have talked about ‘austerity’ and  ‘difficult choices’ so much that it is a common misconception that public sector spending has been cut. It has not. In fact, I wrote yesterday about how spending in July this year was up by 5.1 per cent compared to July 2011.

The rhetoric may be useful in terms of ensuring the public are (more than) fully prepared for the moderation in spending growth that the Government has implemented, and the cuts to specific programmes and bodies that it has undertaken. It may also be useful for calming bond markets and convincing them that the British Government will indeed eventually bring spending down to match tax revenues.  But one thing it is also doing is depressing confidence among people employed in and reliant upon contracts from the public sector.

This would be more than counteracted by the confidence of consumers with more disposable income and businesses with readier access to freed up resources if the rhetoric were backed up with action on spending cuts and the tax cuts they would allow. But consumers are still paying high taxes and businesses are still being priced out of labour, property and product markets due to competition from the public sector, killing off potential growth, jobs and prosperity.

As many are now saying, public spending is rising too far, too fast. It’s time to wield the axe and cut tax, Mr Osborne.

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