The Tories have clarified that £4bn of tax cuts pledged in their election manifesto will be postponed by a year, following Labour and Lib Dem claims of a ‘black hole’ in Conservative budget plans.
The party’s manifesto pledged to ‘use the remaining £4bn of our £12bn savings to cut taxes in our first budget’.
However, shadow Tory chief secretary George Osborne, denying the black hole claim made by former Brown aide Ed Balls, made it clear in a Sky television interview that the tax cuts would not take effect for a year.
Labour has claimed it found the £15bn ‘black hole’ in the Tories’ financial strategy yesterday, with Tony Blair saying that Conservative spending commitments ‘cannot possibly add up’.
And Lib Dem shadow chancellor Vince Cable, standing in for Charles Kennedy who was at his pregnant wife’s bedside, said: ‘I am a believer in the old adage that you can’t get something for nothing.’
Meanwhile, Lib Dem shadow chief secretary David Laws said £8bn of the Tory cuts were ‘unrealistic’ and accused the Tories of ‘filleting out’ sections of the James Report that proposed cuts because they were politically unpalatable. This was a reference to the sacking of former finance spokesman Howard Flight who revealed secret Tory plans for a further round of spending cuts.
But Tory Shadow Chancellor Oliver Letwin insisted that with his spending plans ‘it will be possible for us both to reduce borrowing and avoid the tax rises that are implied by Labour’s spending plans after the election – and to cut taxes by £4bn.’
Shadow Tory education secretary Tim Collins said the ‘dishonesty’ behind Labour’s black hole claim was ‘dragging the election campaign into the gutter’.
The ‘black hole’ was identified by Ed Balls, former economic adviser to chancellor Gordon Brown and Labour candidate for Normanton, who said that by 2007-08 a Conservative government would be spending £15bn more than Labour’s spending plans.
He said this arose from having to borrow more to finance their mixed programme of enhanced cuts in some areas and increased spending in others, along with a pledge to make £4bn in tax cuts.
He predicted Tory economics would increase interest rates as a result of ‘unaffordable’ proposals.
Balls based his prediction on Tory spending increases amounting to £6.9bn in 2005-06, £14bn in 2006-07 and £15bn in 2007-08, but Tory ‘cuts’ of £7bn in 2006-07, £12bn in 2007-08 rising to their promised £35bn by 2012 – and the £4bn in tax reductions.
His attack was an attempt to counter the Tory prediction that current government spending plans will require tax increases later this summer.
Tony Blair said all this showed that electing the Tories involved an ‘economic risk’ with future interest, inflation and foreign exchange rates.
Chancellor Gordon Brown said in Edinburgh: ‘Having spent months suggesting they will cut taxes immediately, the Tories are now forced to admit they cannot find the money to do so … their sums don’t add up.’
Earlier, Letwin claimed on BBC Radio that he would ‘cut taxes by a modest £4bn in our first budget’ and claimed the Institute of Fiscal Studies had confirmed the government would be required to raise taxes after May 5 by £11bn.
Mark McMullen joins the private client services team from Smith & Williamson
Merger between Clear & Lane Chartered Accountants and Magma Chartered Accountants was finalised on 3 February
BDO has taken its new partner intake to 23 during the first half of its financial year, including the appointment of five partners in five weeks
The firm reports 7.6% global fee income growth for the year ending 31 December 2016