Tories propose corporate tax break?

Posted on February 24, 2010 by | 5 Comments

It wasn’t just Greens keeping a close eye on our spring conference. Tory candidate for Brighton Pavillion, Charlotte Vere, was regularly tweeting about the event.

This particular one caught my attention:

@carolinelucas @jasonkitcat How wld you pay 4 ur policies on scrapping VAT + NI:£130bn, green jobs £44bn + transport £10bn?so £184bn.No rush

so I replied:

@charlottev dunno bout @carolinelucas @jasonkitcat, I’d pay for them by not trashing the economy with job cuts. #publicspendingpaysforitself

Her response:

@AdamRamsay Thanks Adam. Erm, public spending costs money and that is why I am trying to establish where it is coming from.

So I outlined the three reasons that public spending pays for itself – it is generally investments rather than diminishing value capital costs (unless it’s roads), the multiplier effect, and the fact that it’s cheaper to borrow and spend than to allow the economy to be trashed by recession:

@CharlotteV – a pretty simplistic understanding of economics. Public spending is recuperated each time its re-spent. #gpconf #keynes

@CharlotteV – a pretty simplistic understanding of economics: public spending tends to mean investments that save cash later #gpconf #keynes

@CharlotteV – a pretty simplistic understanding: public spending multiplies good bits of the economy = more cash to spend. #gpconf #keynes

Anyway, we went too and fro, with me arguing that Tory job cuts would be more expensive as they would send us into an economic nosedive, and her arguing that:

@AdamRamsay We simply do not have any more money to spend. BTW, they tried that in the 1930s – it didn’t work = Depression.

which I thought was an amusing understanding of, erm, time & chronology.

and

@AdamRamsay And doubling the annual amount to borrow – credit markets would laugh.

which is amusing given that Mervyn King has now said that Britain’s credit rating is not at risk.

But then she said something I hadn’t heard before. When I said they were going to cut jobs, she said Tories would generate an environment for more jobs. I asked how, she said:

@AdamRamsay Low interest rates, lower corporation tax, cutting red tape, increasing skills availability – good for job creation?

I was astounded. I know Tories are always wanting to cut taxes for big business, but is this really their policy when they are claiming the deficit is the biggest problem we face? Will they really cut taxes for RBS while university courses are being closed?

So, on questioning, she clarified:

@AdamRamsay Conservative policy is there will be corporation tax cuts, partic small co rate to 20%. Corp tax is disincentive to employment

So, that seems to be our answer. The Tories think there is no money. They simply have to cut universities (in whom every person employed multiplies up to an extra 2.5 jobs, according to a study by Edinburgh Uni last year) so that they can give a tax break to their mates at RBS (in whom every person employed only multiplies up to 1.5 extra jobs, according to the same study) and Tesco.

Flabbergasted, two of my Bright Green Scotland colleagues joined in:

garydunion @CharlotteV Where’s the money coming from for your tax cut? You told @AdamRamsay that “there simply isn’t any money.”

and

loota @CharlotteV @adamramsay Surely the money that funds your corporation tax cut could be used for Universities,or other public services instead

And she replied:

CharlotteV @garydunion Funded by simplication of tax reliefs and capital allowances. Leaving more money in a co will mean they employ more people.

Now, there is possibly a tiny extent to which simplification saves bureaucracy, and so a little money, but, a) again, if the Tories can save some money, are they really going to spend it on tax breaks for banks and supermarkets at the same time as they are enacting savage cuts to the vital public services our economy needs? b) If you are going to genuinely raise serious money by ‘simplification of tax reliefs’, surely this means some people getting less relief? In other words, the proposal is to introduce higher taxes for some people who currently get tax relief, and to cut public services so that they can cut taxes for big companies.

I may have got the wrong end of the stick with this. But are the Tories genuinely proposing tax cuts for big business at the same time as swinging cuts in public services? Why haven’t I heard that before?

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Comments

5 Responses to “Tories propose corporate tax break?”

  1. Luke WalterNo Gravatar
    February 24th, 2010 @ 6:57 am

    The cut in corporation tax was mentioned on Conservative Home when Tim Montgomerie was telling us to vote Conservative…because of George Osborne.

    http://bit.ly/8X69Ki

  2. DespairingNo Gravatar
    February 24th, 2010 @ 10:45 am

    As fun as it is to pick apart Tory policies, surely the Greens are in an enviable position here? They can have a broad policy on the economy without having to spell out all the details on how they would implement them since – as much as I’d like it – they’re never going to win a majority at Westminster.

    Surely the better argument to have with the Tories would be to get local – how are they going to stimulate the Brighton economy, how are they going to encourage funds going into local transport or the local schools?

    Those are perhaps Council Election tactics but people don’t vote Green to elect a Prime Minister (unless it’s a tactical vote), they vote Green because they believe there’s a better alternative for the local area.

  3. Adam RamsayNo Gravatar
    February 24th, 2010 @ 10:59 am

    Hello,

    well, yes, but I think that it’s not just about Government. It is crucial that we elect MPs to make the case for a sensible economic policy – Government policy is shaped by debate and the strength of opposition. Green MPs will be crucial in curtailing the worst excesses of Tory cuts.

  4. IanNo Gravatar
    February 28th, 2010 @ 4:01 pm

    Adam – Do you have a link (or reference) to the Edinburgh University study you mention in the post? Thanks.

  5. Adam RamsayNo Gravatar
    February 28th, 2010 @ 7:18 pm

    Hi Ian,

    the link is here.

    I couldn’t find it before, which is why I didn’t link to it. Now I do, I see that the figures are slightly more complex than I had remembered:

    The figures are:

    • for every £1 of GVA a further £0.77 GVA is created in the Edinburgh
    economy, £0.73 GVA in the Midlothian economy and £1.25 GVA in the
    Scottish economy; and

    U of E GVA Multiplier Edinburgh: 1.77 Scotland: 2.25
    U of E Employment Multiplier Edinburgh: 3.05 Scotland: 2.88

    link:

    http://www.planning.ed.ac.uk/Governance/CMG/…/EconomicImpactStudy.pdf