Politics

Tory leadership: Gove says wealthy don't need more tax cuts as he launches campaign – live news


Until this weekend the biggest I’d seen (again, I may have missed something) have come from Dominic Raab and Jeremy Hunt. The former wants to spend well in excess of £30bn a year on cutting income tax and national insurance contributions. That certainly would rule out any end of austerity on the spending side if he wanted to keep a lid on national debt, though perhaps he is after a more generally expansionary fiscal policy. If so, I don’t think he’s made that clear.

Mr Hunt, on the other hand, has talked about dramatic increases in defence spending, saying that it should rise decisively as a fraction of national income. Each additional 1% costs £20bn a year. Again, whether he would fund this from higher taxes, higher borrowing or lower spending on health, education or something else he has not made clear. If we were to increase defence spending in this way, it would represent a dramatic break with recent decades. It is no exaggeration to say that continued falls in defence spending as a fraction of national income over a 60-year period have been central to allowing us to increase spending on health and other parts of the welfare state without significant rises in tax.

Michael Gove has now entered the tax and spending fray, illustrating his continued lack of interest in the advice of experts by suggesting that he’d like to abolish VAT. This tax raises nearly £140bn a year. He’d like to replace it with a sales tax. That would be the biggest, riskiest and most disruptive change in the tax system in at least half a century. He might like to ask himself why the biggest global change in tax in recent decades has seen countries around the world moving in precisely the opposite direction, why every OECD country bar the United States and why 166 countries now have VAT.



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