Quality | 2010.08.29
Treasury issues stark warning on taxes
• No easing of burden for at least five years, says Treasury chief
• Hope of cuts for better-off and middle classes dashed
The extent of austerity measures facing Britain is laid bare today as the Treasury chief secretary reveals there will be no cut in the overall burden of taxation for at least five years.
The message from Danny Alexander, the Liberal Democrat in charge of slashing the record £155bn deficit, will alarm Tory MPs and others who hoped that the government\'s programme of savage spending cuts would create room for tax reductions before the next election.
But speaking to the Observer in his first national newspaper interview since entering the Treasury, Alexander makes clear that total tax revenue will have to remain at least at current levels throughout the parliament to put the nation\'s finances back in order.
"I think the tax burden is necessary as a significant contribution to getting the country\'s finances in order," he says. "So it will have to stay at that level for quite some time."
Asked if a reduction in the overall tax burden would be possible once the nation\'s books were back in order, Alexander adds: "You are asking me to take decisions for five years down the line now and I am not going to do that. What I want to see is a rebalanced and fairer tax system. That is what I think is most important."
With plans already in place to reduce tax on lower earners, his comments appear to dash hopes of tax cuts for the better-off and middle classes until 2015 at the earliest.
Alexander argues that the twin goals of deficit reduction and fairness, as well as plans for a greener economy, are part of the coalition agreement and will drive decisions on tax. "The plan we set out is a plan to rebalance the tax system. We need the tax revenues from the taxes we are putting up in order to help us reduce the deficit.
"But we also want to rebalance the tax system so that particularly people on lower incomes keep more of what they earn of their own money when they go out to work so that they are encouraged to go out to work.
"In due course [we will be] looking at other ways to rebalance, looking at green taxes. It is about rebalancing."
Alexander was speaking ahead of a week in which the government\'s "star chamber" of ministers will meet for the first time since departments submitted plans for cuts of up to 40% in budgets. The minister appeared to be sensitive to accusations that the Lib Dems had signed up to policies that hit the wealthy less hard than the poor.
Last week, claims by Lib Dem leaders that the budget measures were "progressive" were undermined by a report from Britain\'s leading independent tax experts that claimed the emergency budget in June had hit the poor harder than the rich and had been "clearly regressive".
The Institute for Fiscal Studies (IFS) said that those on the lowest incomes – particularly those with children – were the biggest losers.
This weekend the coalition faces further charges of unfairness and of creating a country increasingly split between a relatively prosperous south and a north that faces a deepening unemployment crisis. In a report to be published tomorrow, the Centre for Economics and Business Research predicts an "agonising transition" for the north of England economy, estimating that one in 10 people will be unemployed in parts of the north between 2010 and 2015. This compares with just over 7% in the south-east and 8% in the south-west.
This weekend the heads of the Child Poverty Action Group, Barnardo\'s, the TUC, Oxfam, Save the Children and the Equality Trust, among others, raise concerns in a letter to David Cameron and his senior ministers about a lack of fairness and demand that a commitment to it is fully reflected in policy.
Matthew Sinclair, director of the right-leaning Taxpayers\' Alliance, which reflects the views of many Tory MPs, said: "During the election campaign, taxpayers were promised cuts in inheritance tax by the Conservatives and increases in the threshold for income tax by the Liberal Democrats.
"Both parties were at pains to rebut any suggestion that they planned hikes in VAT. So it is incredibly frustrating if the Treasury are planning that new and higher taxes will remain in place till the next election. The fiscal crisis follows a decade of tax hikes, not cuts, and the government should be working to ease the burden on families."
For more information, please visit
http://www.guardian.co.uk/politics/2010/[...]alexander-treasury-tax-warning
