Will Tories get Osborne to slash taxes?

George OsbornePA

The ruling political parties are agreed on one thing: the economy needs a bit more money in it to get things moving. However, the question of the best way to do this is opening up some serious rifts. Some say cutting our debts should remain the top priority, others argue that taxes need to be cut - even at the expense of more borrowing, while others are keen for the government to spend us out of economic difficulties by taxing heartily and spending on infrastructure.

So what's going to happen?


This tussle has been going on for some time. The latest development is that some backbenchers are going public with their demands for tax cuts. David Ruffley MP said there is a growing feeling among a number of backbenchers that borrowing is going to have to increase, in order to give people a tax cut and get them shopping again.

Ruffley said: "The markets will not go haywire if there was a modest loosening in borrowing in the short run, if it was for the right reason." He even suggested there would be broad support for another cut in VAT - although the jury is still out on whether it was such a roaring success last time.

Spending cuts

Other MPs are excited about the possibility of a tax cut, but would like to see it funded by more aggressive cuts in government spending. Tory MP Douglas Carswell has been one voice raised in support of this idea. It begs the question of whether taking money out of the pockets of the poorest (who are likely to spend it all) and put it into the pockets of the richest (who won't) is such a helpful idea. It would depend on how those tax cuts were structured and where the spending cuts did the most damage.

Cut debt

George Osborne, meanwhile has been vocal in his robust defence of cutting the deficit as the only long-term structural way to improve the fortunes of the country and get us back on track - despite the pain we're all suffering in the interim.


And Treasury Chief Secretary Danny Alexander has been busy talking about more spending, revealing plans to channel government cash into paying for infrastructure projects in order to get the economy moving again. He said ministers were "shaking the Whitehall tree to make sure no one is stockpiling capital that can be put to good use today."

Who wins?

What's likely to happen is that Osborne and Alexander will win the day. The tough regime will be kept in place, but spending on infrastructure will be rolled out in order to boost the economy. Whether money can be loosened up from with government departments is highly questionable. The culture of hiding cash and then blowing it all before the year end is far too deeply ingrained to change fast enough for Alexander's needs.

Of course the backbenchers will stay vocal, and it may well come in very handy for them, as when the economy continues to go to hell in a handcart they will be able to change their tune and start crowing about how they were right all along.

But what do you think? What would be the best approach? Let us know in the comments.
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