Monday, November 10, 2008

Another "tax cut con" on the way?

Quick bit of speculation. Let's say that Brown meets the rampant speculation and cuts some taxes. Let's say he cuts them by £10bn. How will he answer the charge that £10bn in tax cuts is equal to £10bn in spending cuts? After all, in response to the Lib Dems extremely modest proposals for tax cuts worth £20bn he has been very clear that it would mean £20 billion of public spending cuts.

For the past decade Brown has pushed the entire fallacious argument that anyone proposing tax cuts must, in consequence, reduce spending by the same amount. The argument back to him has been the obvious one that in a growing economy that is simple not the case. However, Brown does not have that argument anymore because the economy is shrinking (or at best static). In which case, tax cuts must mean a reduction in public spending.

So what if he argues that he is not cutting public spending whilst simultaneously offering tax cuts? How can he get himself out of the trap his own dodgy rhetoric has created? I reckon he is going to borrow more to cover the shortfall which, in the end, means that we have another tax cutting con.

Brown is the absolutely master at cooking the books; I would not be surprised to see this happen. Think about it this way. Let's say, for arguments sake, public spending borrowing is £10bn in total. Brown offers tax cuts worth £1bn and then just increases his public spending borrowing to £11bn with the understanding that the tax rise will occur again at later date.

Zero sum game, but you can bet he pushes himself as "Brown the Tax Cutter" again just like last time. The question is whether the media will push his line for him again and then just scream and shout when the reality of it comes to fruition.

No comments: