Expect tax increases, who ever wins

The announcement, this weekend, that the Conservatives were not likely to take inheritance tax seriously demonstrates a general confusion within the party over taxation. It is not a new development. Shadow Business Secretary Charles Clarke let the cat out of the bag with the announcement, probably on sound backing from those within the upper strata of the party. Indeed, privately the apparent u-turn over inheritance tax is not a new thing and has been predicted by several leading economists, not to mention economic historians.

The BBC’s Mike Crick quite neatly demonstrated what the Tories have been worrying about for some time, empty ministerial boxes, if they gain power. It is fair to say that the last 12 years of Labour rule have witnessed unprecedented levels of public expenditure. And, leaving aside the debate over whether this was necessary, it now seems pertinent to note the old adage – we’re about reaping what we’ve sown. The IMF recently noted that Britain would be the worst placed to respond to any ‘green shoots’ in economic recovery. Indeed, as another stimulus package has been launched in the United States there now appears to be increasingly vocal calls from within Europe that Britain should restrain its economic approach.

Niall Ferguson, that great epitome of economic history, commented on Channel 4 News yesterday that “Big government is here to stay”. This indeed may be the course of action taken, employing a Keynesian approach of state sponsored works and spending to relieve the economic outlook. But this doesn’t match up with Dave’s ideas. Shortly following his leadership victory a raft of new policies seemed to indicate future tax cuts, a raise in the inheritance tax threshold and even a tax break for some working family. Any future government shall now find this an impossible task. Indeed, to fund the continued level of stabilisation of our banks we’re likely to see an even further squeeze in public spending. Higher Education has begun to witness such cuts. I attended a Parliamentary Select Committee meeting on HE funding yesterday and the overriding consensus from Liverpool’s senior academics was the need for greater levels of investment. In other words, higher tuition fees for students.

So, whilst some may be treating Clarke’s slip as a major change in Tory policy it is worth noting that any future government (and remember, we shall have one within a year and a half) is going to have to increase taxes. Like it or lump it. It’s not likely to be the Conservatives confused as the way ahead in the future but also quite a few political strategists....