Aug 2007 13

Conservative plans to cut £14 billion off red tape burden2

John Redwood’s competitiveness policy group will present its final report on Friday. The report has been widely trailed in the media. A central recommendation is reported to be a £14 billion reduction in red tape on business. This is reported to include:

Repealing working time regulations;
Scrapping data protection laws;
Reviewing the 1974 Health and Safety Work Act;
Relaxing redundancy laws to make it easier to fire staff;
Reducing financial services regulation;
A simpler regime for administering tax;
Scrapping Home Information Packs;
Reducing the number of Whitehall targets imposed on local authorities.

These proposals sound very sensible. They should make it easier to do business in Britain for both large and small companies and will improve Britain’s economic competitiveness. It also looks as though the report will be welcomed by the Conservative leadership, although with no specific promises at this stage.

Regulation imposes a heavy burden on businesses, and so the report is right to focus on specific ways to reduce it. But we don’t yet know what the report will say on the burden of tax hitting small and large businesses. We hope it will propose reductions in both the main rate and the small companies rate of corporation tax; relief on business rates, which have done so much damage to small shops and other businesses; and further alignment of income tax and NI, which can be an administrative nightmare for firms. We await the report’s publication on Friday with interest.

Of course, much of the tax relief discussed above has already been proposed by the Tax Reform Commission, and so it may be that John Redwood’s report need add nothing new in that area. But it would be rather strange if a report designed to provide answers to the problems of Britain’s economic competitiveness ignored the burden of taxation completely.

To that extent, it is slightly worrying to read in the Financial Times that the report "will endorse Mr Osborne’s mantra that economic stability must come before tax reductions". For that mantra is to admit defeat. An immediate reduction in the overall burden of tax (not a small one at the end of an economic cycle that could last ten years) is a necessary if not sufficient condition of a serious improvement in economic competitiveness. To get that overall tax reduction, spending decisions will have to be made. If the Conservatives are unwilling to make those spending decisions, they will only half-succeed in creating a much more competitive economy.

Other countries in Europe realise that they cannot ignore tax. The Netherlands, Germany and France have all reduced taxes recently, to say nothing of Ireland and the eastern European countries. It’s time for Britain to do the same.

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  • Politicorich

    These proposals are a much needed and long overdue dose of common sense. It is wrong to see them as either a ‘lurch to the right’, or even as particularly groundbreaking. In the last ten years Britain has had well over 100 tax rises. We have had more money ‘invested’ in public services than ever before. The spending binge doesn’t appear to have worked very well. Cries about ‘Tory Cuts’ might have worked in the 1980s and 1990s, but not now. These aren’t tax cuts that are being proposed, simply a lightening of the burden of regulation that reaches into every corner of our lives and our economy. Even if implemented in full, they will not make Britain an exciting tax haven, they will simply reduce the distance we are behind both our traditional competitor countries, and the surging new economies in terms of competitiveness, taxation, and, increasingly, quality of life. If tax cuts are so dangerously rightwing, why did Gordon Brown package his 2007 Budget as a taxcutting budget? Why the fanfare about some slight jiggery pokery around thresholds? One must assume we had all that fuss after ten years of tax rises because the Labour party decided tax cuts are suddenly starting to look attractive, mainly because of the last ten years of profligacy. The shrill reaction to the Redwood Report from the Labour frontbench shows how afraid they are of a Conservative Party getting back in touch with peoples’ everyday and perfectly legitimate concerns. The political centre ground is decisively shifting. In any contest between a Labour party who promise the illusion of tax cuts, and a Conservative Party who genuinely mean them, the voters will prefer the real deal, in much the same way battles over schools’n'hospitals will usually be won by Labour. The key challenge now is to cement these tax reducing attitudes into more mainstream debate so politicians, of any party, will not be afraid of giving the people what they want and the economy what it needs: TAX CUTS! Reductions in individual and company tax, and regulations more generally are not something which can be introduced when everything else is going well, they are the magic wand that will make everything go well!

  • Graeme Pirie

    I just can’t get my head round the reluctance from all politicians to mention the dreaded “tax-cut”.
    The Conservatives are making a huge error in trying to emulate labour policies – can’t they understand that’s not what we want??
    All they have to do is identify some of the current government waste (and 5 minutes on this site will point them in the right direction) and commit to reduce taxes by that amount – easy!! And no possible claim of a reduction in public services.
    Red tape reductions are welcome – BUT as an individual and SME, I want LESS of my money taken by government.