George Osborne rules out Tory tax rises to cut deficit

Chancellor George Osborne: "I'm clear that tax increases are not required"

George Osborne has ruled out tax rises to meet deficit reduction targets if the Tories win the next election.

The chancellor said he would be able to cut borrowing through spending cuts alone - something he suggested Labour would not be able to match.

The Institute for Fiscal Studies warned that taxes had been raised after the 2010, 2001 and 1992 elections.

Labour said it was Mr Osborne's fault the deficit was so large and it had plans to cut taxes for the low-paid.

Lib Dem leader and deputy minister Nick Clegg said his party would not rule out tax increases after the next election.

"I actually think there should be some increases in taxes for people at the very top," he told BBC News.

The coalition has set out plans for £11.5bn in additional spending cuts for the year after the 2015 election, proposals which have been broadly accepted by Labour.

'No warning'

Mr Osborne told MPs there had been no decision on the balance of cuts and taxes after that - an equation which is likely to hinge on the outcome of the next election and the composition of the next government.

But he said his view was clear "that tax increases are not required to achieve [further consolidation]" and this "can be achieved with spending reductions".

He said his plans to cut the deficit with 80% spending cuts and 20% tax rises were only ever "a guide".

Analysis

This was a deeply political announcement by George Osborne, designed to put tax at the heart of the next general election campaign.

It differentiates the Tories from both the Lib Dems and Labour, neither of whom have ruled out tax rises.

Mr Osborne is gambling that the public are more willing to put up with further spending cuts than see their taxes go up.

It is a strategy that has worked for the Conservatives in the past.

John Major won the 1992 election - against many expectations - with endless warnings about "Labour's tax bombshell".

The problem for Mr Osborne is that few independent experts believe the black hole at the heart of Britain's finances can be plugged by cuts alone.

"I'm a low-tax Conservative who believes we could have lower taxes, but I think they should be sustainably lower," he said.

"I'm not for deficit-financed tax cuts, that you end up having to increase taxes later to clear up the mess you have made of the public finances."

Last month, the Institute for Fiscal Studies (IFS) suggested Mr Osborne would have to raise taxes by £6bn to maintain the 80%-20% split between cuts and tax rises.

Paul Johnson, who heads the influential think tank, said he was not surprised by Mr Osborne's assertion.

"Chancellors don't tend to warn people before elections that they are going to raise taxes," he told BBC Radio 4's Today programme.

Whoever is in power after the next election would have to make a choice between spending cuts or tax increases, Mr Johnson added, pointing out that previous governments faced with a similar situation had raised taxes as part of their approach.

"In previous post-election budgets - think of 2010, 2001 and 1992 - all of them have seen tax rises."

Start Quote

We are looking at giving middle and lower income families a tax cut by introducing a 10p starting rate of tax, paid for by a mansion tax on the wealthiest”

End Quote Chris Leslie Shadow Treasury Secretary

But Mr Johnson said many Tories believed there was further scope to reduce the size of the state, given that if spending continued to be cut by the levels envisaged by Mr Osborne, overall expenditure by 2018 would still be no lower than it was in 2004.

Mr Osborne said he suspected Labour would raise taxes after the election "but that is for them to explain."

Shadow chancellor Ed Balls has made no specific commitments on tax but said a future Labour government would have an "iron discipline" on spending and reduce the deficit in a "fairer way".

Shadow Treasury minister Chris Leslie said Labour was planning some tax cuts if it won the next election.

"The reason why there's still going to be a big deficit after the next election is George Osborne's total failure on growth in this parliament.

"This economic failure means the government's plans will have to be Labour's starting point, but we will make different choices.

"For example, we are looking at giving middle and lower income families a tax cut by introducing a 10p starting rate of tax, paid for by a mansion tax on the wealthiest.

"But George Osborne's priority should be getting strong economic growth this year and next year. More growth now would mean a better situation on the public finances after 2015."

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