Make-me leader politics has combined with make-believe tax and spendby Paul Wallace / June 11, 2019 / Leave a comment
The Conservative Party’s leadership contest was never going to be a pretty sight, as some of the ten candidates in the race to become the next prime minister parade their determination to yank Britain out of the EU whatever the economic cost, while others proclaim their ability to secure a better deal than Theresa May. But it has got off to a particularly ugly start by revealing the poverty of Tory economic thinking beyond Brexit. The only thing that appears to unite the leading candidates is their readiness to pledge unfunded tax cuts or spending increases, in a race-to-the-bottom to win favour with the party members, who pick the leader from a short-list of two selected by Tory MPs.
Dominic Raab has been doubly irresponsible in his promises, threatening to prorogue parliament in order to push through a no-deal Brexit while showering taxpayers with a 5p cut in the basic rate of income tax. Missing is any mention of the £28bn hole this would dig in the Treasury’s books (according to HMRC’s ready reckoner, the long-run effect of cutting the basic rate, currently 20p in the pound, by 1p is £5.6bn a year). The former Brexit secretary also wants to lift the national insurance threshold to help low earners, which he highlighted at his campaign launch on 10th June. A nice thought but again an expensive one.
Jeremy Hunt poses as the “serious” candidate, vaunting his capacity to secure a new deal with the EU. The foreign secretary may be more reasonable than some of the other candidates in striving to avoid a no-deal Brexit but he appears to be just as cavalier with the public finances. He wants to bring down the corporate-tax rate, currently 19 per cent, beyond a further reduction to 17 per cent already scheduled for next year, to a goal of 12.5 per cent. The long-run cost of bringing the rate down by just one percentage point is £3bn a year. Hunt also advocates a dramatic boost to defence spending as a share of GDP, currently 2 per cent, which would cost £20bn a year for every extra percentage point.
Michael Gove has received unwelcome publicity for his admission about using cocaine two decades ago. At least that diverted attention from the environment secretary’s extraordinary plan to do away with VAT,…