I previously recorded scepticism as to the efficacy of Labour’s 2.5% VAT cut, aimed at stimulating the ailing economy. Preliminary estimates indicate that in the run up to Christmas the government’s strategy proved an abject failure. Whilst shoppers are now responding to slashed sales’ prices, a tiny cut on most consumer goods proved neither here nor there.
In response George Osborne is preparing to unveil the Conservatives’ proposed tax cuts. At first glance these alternatives appear to make considerably more sense than Labour’s £12 billion scheme. These cuts will be funded, promising to mitigate the crippling burden of debt which the current government is intent on inflicting on Britain’s tax payers.
If Osborne becomes chancellor he will seek to cut National Insurance Contributions, which Labour has stealthily increased. Slashing NIC will benefit all earners as well as businesses, thus providing a real stimulus which finds its way directly into people’s pockets. Additionally a Cameron government would instigate measures to decrease tax suffered by savers and pensioners. Two sections of society most hurt by the miniscule base rate of interest would therefore have some of the pain alleviated.
A Sunday Times' interview with Osborne, which is worth reading in full, implies that these proposals represent the start of a concerted Tory effort to take the political fight to Labour in 2009. Whether an election is called next year or not, campaigning will begin in earnest. It is then incumbent upon Cameron’s party to sustain momentum, possibly the whole way to May 2009.