Tim Montgomerie is asking for ideas to counter the deliberately drawn Brown/Balls 20% VAT political dividing line.  He makes five suggestions: admit VAT will rise to 20%, time limit it, ameliorate the regressiveness, promise a focus on spending cuts and launch a growth manifesto.

Guido has an alternative policy – rule a VAT hike completely out of the question.  It is regressive, it hits the poorest hardest, it punishes the many.  Labour can’t counter – they can hardly claim it is necessary if they themselves won’t do it.  Keep on the Balls/Brown side of that dividing line, then mercilessly whack them for raising taxes on jobs, taxes on small businesses and implementing anti-poor regressive taxes.

Promise to do what Obama is doing – cut payroll taxes, cut taxes on small business and get more money flowing in the economy to get it growing again.   Boosting the supply side to drive economic growth will increase government revenue from a faster growing economy and, in fact, cause overall revenue to increase.  The dynamic effects were proven during the Reagan years:

• Real economic growth averaged 3.2% during the Reagan years versus 2.8% under Ford-Carter years and 2.1% during the Bush-Clinton years.
• Real median family income grew when supply-side policies were implemented under Reagan
• Interest rates, inflation, and unemployment fell faster under Reagan than they did immediately before or after his presidency.

Either the Tories believe in the merits of a low tax, high growth economy or they don’t.  You don’t grow the economy by taxing it more.