New In-Depth Briefing Paper: A taxpayers’ guide to the political parties’ responses to the fiscal crisis

December 07, 2009 10:44 AM

Ahead of the Pre-Budget Report 2009, political attention is rightly focussed on the unprecedented fiscal crisis. With the second highest deficit in the EU, the second highest structural deficit in the G20 advanced countries, and debt set to double in three years, this is a problem which demands the full and serious attention of the nation.  

In advance of the Pre-Budget Report on 9th December, the TaxPayers' Alliance (TPA) has produced this in-depth guide to the fiscal policy proposals of the main political parties to provide taxpayers and the media with a blow-by-blow assessment of this key policy area. 

The full report is available to read or download here (PDF).

This report is not an accounting exercise that attempts to cover every party policy and the likely fiscal impact, but an assessment of the main policies that have been announced or are associated with each party. It looks at the pluses and minuses of each of those proposals, providing the most comprehensive guide available to the current state of the debate over what is likely to be the most pressing issue in British politics through to the next election and beyond.

The briefing assesses the main policies associated with the Labour Party, Conservative Party, Liberal Democrats and UKIP. The Green Party and the BNP were studied but do not seem, judging from the key policy documents available on their websites, to have even acknowledged the existence of the fiscal crisis. 

Key Points

A number of particularly controversial policy proposals from each of the main parties appear in the report, including:

•    Conservatives: Increasing VAT to 17.5% or 20%: The Conservatives are widely reported to be considering proposing an increase in VAT to 20%, following the Government's plan to return VAT to 17.5% in January 2010. The report's author investigates the severe, disproportionate and regressive impact this would have on the poor - consuming large amounts of their already limited income.

•    Labour: The 50p tax rate: The Government have made their planned increase in the higher rate of income tax a flagship policy. However, this new report draws together several strands of evidence which suggest that the rate will struggle to raise any money and could actively harm the economy.

•    Liberal Democrats: The "Mansion Tax": The Lib Dems have recently altered this controversial new tax policy to propose an annual tax of 1% of the house value on every home worth over £2 million. The critical reaction from Estate Agents, the similarity of the scheme to council tax which the Liberal Democrats rightly criticise, and the cost of administering such a complex tax, all suggest the idea is seriously flawed.

The report also assesses a wide range of other tax policies and proposed spending cuts for feasibility and impact. To read the full report, click here (PDF).

Matthew Sinclair, Research Director of the TaxPayers' Alliance and author of the report, said:

"The parties are yet to generate sufficiently radical and effective ideas to deal with the fiscal crisis. Instead of proposing the large scale spending cuts necessary to start balancing the books, their spending cut proposals so far only address a fraction of the problem. Instead, they have been coming up with ideas for tax increases that at best won't have any effect at all and at worst will harm the economy in general and the poor in particular. Taxpayers want to hear serious and practical solutions to the serious problems the country faces, but so far the politicians simply haven't engaged with the issue properly."

Ahead of the Pre-Budget Report 2009, political attention is rightly focussed on the unprecedented fiscal crisis. With the second highest deficit in the EU, the second highest structural deficit in the G20 advanced countries, and debt set to double in three years, this is a problem which demands the full and serious attention of the nation.  

In advance of the Pre-Budget Report on 9th December, the TaxPayers' Alliance (TPA) has produced this in-depth guide to the fiscal policy proposals of the main political parties to provide taxpayers and the media with a blow-by-blow assessment of this key policy area. 

The full report is available to read or download here (PDF).

This report is not an accounting exercise that attempts to cover every party policy and the likely fiscal impact, but an assessment of the main policies that have been announced or are associated with each party. It looks at the pluses and minuses of each of those proposals, providing the most comprehensive guide available to the current state of the debate over what is likely to be the most pressing issue in British politics through to the next election and beyond.

The briefing assesses the main policies associated with the Labour Party, Conservative Party, Liberal Democrats and UKIP. The Green Party and the BNP were studied but do not seem, judging from the key policy documents available on their websites, to have even acknowledged the existence of the fiscal crisis. 

Key Points

A number of particularly controversial policy proposals from each of the main parties appear in the report, including:

•    Conservatives: Increasing VAT to 17.5% or 20%: The Conservatives are widely reported to be considering proposing an increase in VAT to 20%, following the Government's plan to return VAT to 17.5% in January 2010. The report's author investigates the severe, disproportionate and regressive impact this would have on the poor - consuming large amounts of their already limited income.

•    Labour: The 50p tax rate: The Government have made their planned increase in the higher rate of income tax a flagship policy. However, this new report draws together several strands of evidence which suggest that the rate will struggle to raise any money and could actively harm the economy.

•    Liberal Democrats: The "Mansion Tax": The Lib Dems have recently altered this controversial new tax policy to propose an annual tax of 1% of the house value on every home worth over £2 million. The critical reaction from Estate Agents, the similarity of the scheme to council tax which the Liberal Democrats rightly criticise, and the cost of administering such a complex tax, all suggest the idea is seriously flawed.

The report also assesses a wide range of other tax policies and proposed spending cuts for feasibility and impact. To read the full report, click here (PDF).

Matthew Sinclair, Research Director of the TaxPayers' Alliance and author of the report, said:

"The parties are yet to generate sufficiently radical and effective ideas to deal with the fiscal crisis. Instead of proposing the large scale spending cuts necessary to start balancing the books, their spending cut proposals so far only address a fraction of the problem. Instead, they have been coming up with ideas for tax increases that at best won't have any effect at all and at worst will harm the economy in general and the poor in particular. Taxpayers want to hear serious and practical solutions to the serious problems the country faces, but so far the politicians simply haven't engaged with the issue properly."

Latest Blogs:

TaxPayers' Alliance Icon

Aid spending needs to be more transparent

4:55 PM 08, Dec 2016 Harry Fairhead

TaxPayers' Alliance Icon

The sugar tax and the public finances

6:00 AM 05, Dec 2016 Harry Fairhead

TaxPayers' Alliance Icon

Working for the taxman

6:00 AM 26, Nov 2016 Harry Fairhead

TaxPayers' Alliance Icon

Further thoughts on the Autumn Statement

4:56 PM 24, Nov 2016 James Price