David Cameron has – perhaps somewhat rashly – pledged that if he is re-elected, he will freeze income tax, VAT and National Insurance until 2020.
The prime minister has vowed to pass legislation within 100 days of re-election that will keep those taxes – which, between them, account for about 70% of Britain’s tax revenue – at their current levels for the duration of the next parliament.
The response from the media and economists has been unenthusiastic, to say the least, with comments ranging from “vacuous” to “economically illiterate”.
BBC assistant political editor Norman Smith noted that it was a “big call” for any government to essentially set aside one of the “main levers” it had for managing the economy.
The Guardian’s Michael White was rather less equivocal, calling Cameron’s pledge “economically illiterate as well as politically dishonest”. There’s a “simple reason why no political party should, or can, promise not to raise the key engines of tax revenues… it cannot see into the future”, he said. “Global uncertainty hurts national economies, pushes up costs (including borrowing) and reduces revenue. Lower public spending and higher taxes become unavoidable imperatives, not manifesto options.”
Economists have been just as scathing over Cameron’s last-ditch pledge.
Michael Saunders at Citi, said: “I don’t think it is very sensible. It is either a slippery snake-oil salesman sort of thing, ruling out certain tax rises but leaving plenty of scope to raise taxes in other areas or, if real, it reduces your fiscal credibility because you want the ability to raise taxes if your most important objective is to eliminate the deficit”.
Jonathan Portes, director of the National Institute of Economic and Social Research, agreed that Cameron’s pledge could hamper the Treasury’s ability to adapt to adverse economic conditions: “The charitable explanation is that it’s completely vacuous and doesn’t add anything to the pledges already made by the Conservatives, but the potential danger is that it removes the flexibility to adjust tax if things don’t turn out as we hope or expect”.