UK Politics

George Osborne faces Conservative pressure for tax cuts

George Osborne
Image caption George Osborne is facing pressure to cut taxes

Cutting taxes is part of the political DNA of most Conservatives. The problem is so far Tory MPs have had to put up with an awful lot of tax rises from George Osborne.

There has been the rise in VAT; the planned rise in National Insurance and there has been no attempt to reduce Labour's new 50p top rate. Evan the move to take more lower income workers out of tax has simply involved loading more taxes on the better off.

The reason for all this is clear, namely the deficit. That does not make it much more palatable though for many Conservatives, who lament that they did not come into politics to increase the burden of taxation or to make Britain one of the most highly taxed countries in Europe.

Hence the warning salvo from London mayor Boris Johnson calling for the government to set out "a clear direction of travel" on reducing taxes in this Parliament.

It is a call which has resonated with many Tory MPs and started tongues wagging about the need to return to a Tory tax-cutting agenda sooner, rather than later.

Among those leading the move are the head of the party's economic affairs committee John Redwood, who is pressing Mr Osborne in next month's Budget to cut capital gains tax and to begin reducing the top rate of tax down to 40p.

His argument is that the only way to stimulate growth in the British economy is to encourage the wealth creators and the private sector.

He acknowledges this might seem a short term political gift to Labour but in the longer term, he argues, if it helps revive the economy, then it will be a political winner.

It is a call echoed by another Tory, Douglas Carswell. However he believes the tax cuts should be focused on the less well off with the starting rate of income tax raised to between £10,000 and £12,000.

Indeed he suggests that without tax cuts there is no prospect of Mr Osborne's deficit reduction strategy working.

Other Tories are pressing for a pledge to cut the 50p top rate before the end of this Parliament. While many more want Mr Osborne to at least set out a clear agenda for tax cuts in good time for the next election.

It is a call the Treasury is unlikely to be hugely sympathetic to at the moment where the need for tax revenue to put towards paying off the UK's debts is seen as paramount. They will also be deeply wary of anything that might spook the markets by suggesting the government was going wobbly on the deficit.

Even so there is growing speculation the chancellor may raise the tax threshold for low income groups in this Budget further than the £1,000 increase already pencilled in. There have also been strong hints that he may look at shelving the planned 1p rise - above inflation - in fuel duty.

These are not the sort of significant tax cuts that many in his party crave, but they may at least give him some breathing space from the growing pressure on his backbenches for bigger tax cuts. They may also be the only sort of tax cuts the Liberal Democrats would be prepared to tolerate, never mind the markets.

Even so, the mood in the Conservative Party over taxes appears to be hardening. For George Osborne it means the era of tax rises is over. And the clock is ticking on tax cuts.

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