The Conservative Party is a low tax party, or it is nothing. The lesson of the past 40 years is clear: all successful centre-Right parties, across the world, must embrace lower taxes. Those that do not eventually fail and are rejected by the electorate. The Tories under John Major raised tax and were defeated by Tony Blair in 1997. George HW Bush said: “Read my lips, no new taxes”, reneged and lost to Bill Clinton in 1992. And now the old French centre-Right is facing a grave crisis of legitimacy, having embraced much of the Socialist Party’s policies.
The Tories should leave it to Labour to make an economic pitch that would mess with the market and ultimately defund the welfare state.
It would be a terrible mistake for the Tories to fall into this trap this time around. Yes, Labour is hopeless and this will greatly help Theresa May to win in June. But the scale of her majority, the extent to which she reunites the Right and her ability to withstand any challenge from the Left that rises from the ashes of Corbynism will depend a great deal on articulating a compelling economic message. The Prime Minister must win the biggest, most decisive victory possible – not just for herself but also for conservatism.
Yesterday, however, Theresa May refused three times to rule out scrapping David Cameron’s tax lock. The day before, Philip Hammond implied that repeating the previous manifesto commitment not to raise income tax, National Insurance or VAT would be a mistake. He implied that once the election is over, putting the country’s accounts in order will be his first priority. But a good Tory ought to know that the optimum way to reduce the deficit is to cut spending – and cut taxes at the same time. Lower taxes generate higher growth and greater income. They also win votes.
Modern Conservatism operates best as a blend of Burkean Toryism – which seeks to preserve ancient, useful institutions and defend the interests of the nation state – and libertarian economics. Libertarians of the Friedrich Hayek and Milton Friedman school believe that maximum economic freedom results in maximum individual freedom – the ability of individuals and families to carve out their own lives and make their own choices, in the context of a strong economy bolstered by low taxes that unleash an entrepreneurial revolution.
When they forgot this, back in the declinist, Keynesian post-war years, the Tories were in permanent trouble, and with them the economy. The Republicans fell into the same trap in the US, embracing big government, price controls and higher taxes. It took the free-market revolution of the Seventies, and the victory of Margaret Thatcher and Ronald Reagan, to change this. All over the world, centre-Right parties embraced lower taxes – and tax income actually rose in line with falling inflation and faster growth.
In recent years, however, the Tories have flirted once again with big government – partly to shrug off the “nasty” label applied to them by the Left. George Osborne raised dozens of taxes by stealth – notably stamp duty, which slowed sales, clogged up the market and lost thousands of jobs for those working in the industry and its supply chain.
In other words, raising taxes damages the economy and almost invariably hurts those it was supposed to help. It undermines social mobility. And it cedes the philosophical argument to the Left – rejecting everything practical experience has taught conservatives over four decades, because they have lost the confidence to make the case for a smaller state. The Tories should leave it to Labour to make an economic pitch that would mess with the market and ultimately defund the welfare state.
It is still less than a week since Theresa May triggered an election, still time to correct any misunderstanding. The Tories should remember the good things they did under Mr Osborne (and not just the unfortunate ones) when writing their new manifesto. Cutting the highest rate of income tax generated increased revenue; cutting corporation tax attracted new investment and helped achieve record employment.
Moreover, the 2015 pledge not to raise taxes that Mrs May appears reluctant to guarantee was part of a manifesto that won David Cameron a majority against the predictions of most pollsters. It is one of the reasons why Mrs May is in power. Of course, the huge poll lead that she enjoys is very much her own – she has provided superb, confident leadership in the past few months. Her assertion that “Brexit means Brexit” puts her firmly in that Burkean tradition.
But she must use this campaign to establish her fealty to the more libertarian ethic, too. Mrs May should not only commit the Tories to keep taxes as they are but make a cast-iron promise to cut them. History shows this is a winning formula, in every sense of the phrase.