Which taxes will Oliver Letwin raise?
The Conservative Party announced its spending plans in mid January and I commented on them here.The plans were as follows. Compared to Labour's forecasts, they were going to scrap £35bn of wasteful spending, spend £23bn of good spending, then reduce borrowing by £8bn, leaving £4bn of tax cuts.
Unfortunately, according to the Conservatives, Labour's forecasts are wrong. Indeed they accept the IFS's analysis, which says government borrowing will be £39bn in 2007/2008, not the £24bn the Treasury says.
So we know three things. One that the Conservatives thought that the government's borrowing in 2006/2007 was £8bn too high for comfort, two that they now believe borrowing will be £15bn higher than even that figure, and three that they would rather cut borrowing to their preferred figure before tax cuts.
So the only logical conclusion is that the Conservatives will have to scrap their tax cut in order to cut borrowing further. Indeed they will have to raise taxes by £11bn to bring the deficit back to their preferred level. Or they will have to cut their spending plans by a further £15bn.
If anyone can see any flaws in this analysis I'd be pleased to hear it. Otherwise I think Oliver Letwin should own up to whether he is going to raise taxes by £11bn rather than cutting them by £4bn, or he is going to cut spending by £27bn rather than £12bn, or something in between.
posted by Matthew @ 2/03/2005 01:18:00 PM
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