But we can only cut taxes if we continue to reduce the deficit at the same time.
That is going to involve some tough choices. Politicians love talking about the popular things they are going to do – cutting taxes or spending more on particular services – but some are less keen to talk about the difficult decisions that are going to have to be made. I am pleased that my party is facing up to those difficult choices. The people I represent deserve to hear the truth.
Over the last four and a half years, we’ve made good progress in reducing the deficit. It is down by over a third. But because of the fragility of the world economy – particularly the eurozone, which is a key export market for the UK – it hasn’t fallen as quickly as we hoped. We need to finish the job and while the economy is growing strongly start putting aside money for a rainy day. It was Labour’s failure to do this in the good times before the last recession that got us into this mess – they were already running a deficit before the crash, so when tax receipts fell and government spending had to rise the deficit ballooned to the largest in peacetime history.
Our plan is to balance the books by 2018. To do that, we’ll need to find £25 billion worth of savings in the first two years of the next Parliament. That’s a lot of money, but it’s do-able – it’s about 3% of what government spends each year.
We believe we can do this by tackling tax evasion and reducing government spending – in other words, without having to raise any more taxes. And during this week’s Conservative Party Conference, we gave two examples of how it can be done.
Tackling tax evasion
As Conservatives, we believe in low taxes on business. We want to make the UK the most attractive place in the world to base a business.
But we are equally passionate about businesses paying their fair share. We’ve taken a number of measures over the last four years to tackle tax evasion and aggressive tax avoidance.
This week, we announced new plans to end abuse by multinationals who divert profits offshore in order to avoid paying corporation tax. They will dramatically reduce the benefits from complex arrangements such as the so-called ‘double Irish’ used by some large multinationals, especially in the technology sector, to route profits that would otherwise have been taxed in the UK to tax havens.
Freezing working age benefits for two years from April 2016
Tackling tax evasion is popular, at least with voters if not the bosses of the companies concerned.
But sadly, we can’t eliminate the deficit just by tackling tax evasion. We also need to reduce government spending. And the largest single area of government spending is welfare. There’s no getting around the need to take some tough decisions – things you wouldn’t do in any ideal world.
That’s why the Chancellor announced this week that a Conservative Government would freeze working age benefits for two years from April 2016. This would save £3.2 billion a year. It would apply to the main rates of Jobseeker’s Allowance, tax credits, Universal Credit, Child Benefit, Income Support, the Work-Related Activity Group component in Employment and Support Allowance and Local Housing Allowance rates in Housing Benefit. It would not affect disability benefits and pensioner benefits, which would rise in line with inflation. Since 2007, earnings have grown by 14 per cent while most working age benefits have been uprated by 22.4 per cent. After a two year freeze, earnings and benefits should have grown by roughly the same amount, so whilst this will undeniably make life a bit tougher for those affected there is a justification for doing this.
Decisions like this are never going to be popular. But politicians that try to pretend that we can deal with the deficit without any painful decisions simply aren’t being straight with you.