Unfunded Tax Cuts v Unfunded Spending Commitments

Yvette Cooper is spinning to all and sundry that the Tories have made £10 billion in unfunded tax reduction promises without “balancing” tax increases. She is briefing that reducing corporation tax to 27% will reduce taxes by £1.75 billion, £3.2 billion will stay in people’s pockets after the introduction of a transferable tax allowance, £3 billion will not be taxed from those getting working tax credit, £2 billion from the abolition of IHT for all but millionaires and £400 million lost to the Treasury and kept by first-time buyers after raising the stamp duty threshold.
Never mind that reducing corporation tax to 27% will still leave the rate 15% above high growth Ireland’s rate and that the extra billions in people’s pockets will be spent in the economy productively and have positive dynamic effects. Osborne has not balanced his budget plans is her central charge.

Guido wants to know about the Labour government’s unfunded spending commitments:These are the figures from the ONS, in 2003 Gordon made unfunded spending commitments of £36 billion, in 2004 £41 billion, in 2005 £38 billion, in 2006 £34 billion. This was during a time of strong economic performance when Gordon should have been paying down the national debt with budget surpluses. His prolific spending meant that he failed to balance the budget.

Last year he smashed the golden rule with £110 billion to be added to the PSBR after the nationalisation of Northern Rock plus the usual annual unfunded overspend of some £40 billion. To which we can add the off balance sheet fiddles like £725 billion of public sector pensions unfunded, not forgetting the £110 billion in payments due to companies in the next three decades under PFI and £18 billion of debt held by Network Rail and the figure is nearer £1.4 trillion, which is well over 100% of GDP. So the amount of unfunded spending commitments has now reached £1.4 trillion. Yvette Cooper is accusing George Osborne of proposing unfunded tax reductions which are small change in comparison.




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