Tax cuts for savers: a dumb idea from David Cameron

Posted on Tuesday 6 January, 2009
Filed Under Conservative Party

 

THOSE of us that came to political maturity in more ideological times can be forgiven for wondering whatever happened to the notion that Labour and the Conservatives stood for fundamentally different ideas of how society should be organised.

While the turning point can be variously dated, it is patently the case that they no longer do. As a result, a certain degree of passion has long been lacking from mainstream politics. If you need further evidence, just look at statistics for electoral turnout in recent years.

Now some on the right seem determined to reinject the excitement of the Thatcher versus Benn years into the contemporary political scene. Accordingly, David Cameron’s speech yesterday – in which he proposed to cut public spending, so that the Tories can scrap income tax on savings for basic rate taxpayers – is being ridiculously overhyped by the Tory press.

This move from the Conservative leader was hailed by the Daily Mail this morning as ‘widening the political divide with Labour in his boldest tax proposals to date’. An editorial further hammers home the point: ‘A clear difference of philosophy is emerging between the parties. At last, voters are being offered a genuine choice’.

The Daily Telegraph’s front page splash outlines the story in almost identical words to its midmarket rival. Inside, columnist Iain Martin proclaims: ‘There is a clear and widening divide between the parties’.

Really? A few observations really do need to be made at this stage. For a start, the idea of cutting public spending and boosting saving in a recession is taking economic illiteracy to the point of batshit craziness.

OK, I’ll admit to coming from the standard Keynesian position of favouring counter-cyclical fiscal policy at all times. But the multiplier effect of sucking aggregate demand out of the economy like this will be deleterious in the extreme.

What’s the good in giving people tax breaks on the savings if they haven’t got a job, and are thus unable to save money in the first place? Just ask anyone who was on the dole in the recession of the early 1980s. Like yours truly, for instance.

In so far as Cameron’s announcement really is a serious policy idea and not another soon-to-be-forgotten publicity stunt, it is basically an effort to bolster the Tories’ middle-class voting base by means of a rather nugatory and equally see-through bribe.

It may indeed be the case that ‘65-year-old widowed mother’ Roberta MacCallum – one of two heartwarming real life case stories in the Mail – would be £400 a year better off. But the way things are going, that’ll just about take care of the poor woman’s gas bill.

Secondly, is this the best the Tories can come up with by way of an inspirational clear blue water bid to rally the troops to heights of ideological fervour not seen for three decades? Really must try harder, chaps.

Ideological politics proper is about the grand overarching themes, as developed over long centuries of political philosophy; it is about being for or against justice, poverty, racism, violence and democracy. A couple of extra quid a week for those with savings – and mostly, those with savings are by definition among the better off – is neither here nor there.

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