FactCheck: are Tory tax cuts for real?

Last Modified: 14 Aug 2007
By: Channel 4 News

Is John Redwood offering more than just red tape-slashing in his tax proposals?

The claim

"British business would get a saving of £14bn a year, which would be a tax cut by any other name."
John Redwood on his new tax proposals

The background

In the 1980s, the Conservatives were the party of low taxation. In 1987, they romped to a landslide election victory on the back of Nigel Lawson's tax-cutting budget.

Many Conservatives believe the party should still be campaigning on a platform of tax cuts. George Osborne and David Cameron have, however, refused to make any such promises.

John Redwood has always been a leading figure in the party's tax-cutting fraternity, and he has rowed with party leaders about the issue before.

So when he announced plans under which "British business would get a saving of £14bn a year, which would be a tax cut by any other name", it was seen in some parts of the press as the Conservative Party lurching back to its old right-wing habits.

But is it really announcing a tax cut?

The analysis

John Redwood is not announcing a tax cut in the orthodox sense of the word. He has announced plans to reduce the regulation of business, repealing legislation on working hours, employment and data protection legislation.

The plans haven't been announced in full - and they also include plans to remove regulations on the sale of financial services products, such as mortgages.

The small print of his proposals hasn't been published yet, and there may be some specific proposals in the report which are genuine tax cuts. But the main body of his proposals - reducing regulation - can't really be called a tax cut.

Regulations look rather like taxes, as they're a cost imposed on business by government for the benefit (in theory at least) of the general public. Hence Redwood's argument that lifting regulations is a tax cut by any other name.

Red tape

Axing red tape is more attractive than cutting taxes, as it doesn't take any money out of the government's coffers; so it doesn't have to borrow or cut services to fund them.

The most important difference, though, is that it's much easier to cut taxes than it is to cut regulation.

Many of the proposals would bring a future Tory government into conflict with Europe, as many of the regulations they're targeting are mandated from Brussels.

As Richard Lambert, director-general of business lobby group the Confederation of British Industry, told the Financial Times on Monday: "Successfully cutting red tape is something all governments find enormously difficult to achieve in practice."

The verdict

It may seem like a dry semantic argument, but the difference between a real tax cut and a red tape-slashing exercise is important.

Old-fashioned tax-cutting Tories may appreciate this slight change in the colour of the party's rhetoric (though George Osborne is not obliged to accept Redwood's recommendations).

But if this is the closest they can come to delivering real tax cuts, then many on the party's right will be sorely disappointed.

FactCheck rating: 2

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