The Gove leadership campaign started off with a burst of energy, as he claimed to represent a ‘unity’ approach. But after revelations over past drug use, and several economic policy pledges, Gove’s chances are looking slimmer by the day.
With the Conservative Leadership contest opening to its first round of votes today, Michael Gove was certainly biting his nails with anxiety over his result. Even a week ago, Gove was seen to be a firm contender who could challenge the favourite, Boris Johnson. But last weekend’s revelations over his use of cocaine in the past have put cold water on his plans. Members of the Conservatives urged him to withdraw his nomination over the issue, but against the media backlash he’s pressed on.
Outside this drug-fuelled debate, Gove wrote in the Sunday Telegraph of his plans to scrap VAT after Brexit. This announcement was perhaps instigated after Boris Johnson stated he would look to raise the higher rate from £50,000. Both received scrutiny, but Gove’s pledges have raised questions over the low-tax models Conservative candidates are establishing.
Would replacing VAT with a lower sales tax help the British economy to prosper?
SAM DUMITRIU, Research Director at The Entrepreneurs Network think tank – Writing in The Spectator, he stated that this move would cause a significant deficit for the Treasury. “If we were to replace it with a US-style sales tax set at ten per cent… the Treasury would face a shortfall of at least £68bn, before the inevitable added tax evasion is factored in.” Signing off with “You can’t help but think this is a mistake that he will come to regret.”
[Source: The Spectator]
RICHARD MURPHY, Tax expert and political economist – Writing on the Tax Research UK blog, his belief goes further to suggest a deeper impact on consumers. “If his sales tax is ‘simple’ it will be charged on everything. So get ready to welcome sales tax on food then, for example. This tax is, then, much less likely to be fair then. In fact, we can be sure it will be more regressive: it will be paid in higher proportion by those on low income than high income.” He damned the proposal suggesting, “Those who are stone cold sober will not see anything of merit in what he is proposing.”
[Source: Tax Research UK Blog]
GEORGE PERETZ QC, Public lawyer and trade expert with the UK Trade Forum – Responding on Twitter to Gove’s announcement, his issue is with the complexity of any replacement. “Is VAT perfect. No it isn’t. But the problems with it tend to centre round exclusions and expemptions… If you want to cut VAT fine: but explain where the £ will come from instead. But don’t replace it with a system that works less well, raises less money, and imposes more economic and compliance burdens on business.”
PAUL JOHNSON, Director of the Institute for Fiscal Studies – In The Times, Johnson lays out a fair criticism of the announced candidates’ economic policies, calling Gove’s plans “the biggest, riskiest and most disruptive change in the tax system in at least half a century.” Johnson then rightly compares with other countries’ tax systems, “He might like to ask himself why the biggest global change in tax in recent decades has seen countries around the world moving in precisely the opposite direction, why every OECD country bar the United States and why 166 countries now have VAT.”
[Source: The Times]
ALF YOUNG, Business columnist and visiting professor at the University of Strathclyde – Young writes in his column for The Times of the potential impact on devolution, “Were any of these big fiscal ideas to become reality, there would be additional consequences for Scotland’s devolved government. For instance, were Mr Gove to win and carry through his pledge to scrap VAT, it would put an end to the already-postponed VAT assignment plan for part-funding Scotland’s devolved budget.” He signs off, “Farce doesn’t do it justice.”
[Source: The Times]
STEPHEN CRABB MP, Conservative MP for Preseli Pembrokeshire, former DWP minister – Crabb is backing Sajid Javid for the contest, but wrote on Twitter, “The Tory leadership tax cut bidding war is nuts. The candidates shouldn't makes [sic] these promises and members shouldn't take them seriously. This contest is not the forum for crafting a sensible tax/spend strategy.”
Michael Gove’s fast and loose promise with VAT fails to recognise the importance of the tax to overall government income. His famous, but somewhat misquoted, line from 2016 is a potential source of satire for why this promise was made.
“People in this country have had enough of experts.”
But his pledge to scrap VAT is just as slated and economically inviable as the other policies suggested by the other candidates. Boris Johnson’s near-offensive discussion of raising the £50,000 rate of tax sits alongside Gove’s attack on VAT, based on neo-liberal economic pretension.
After nearly 10 years of austerity, these policies are farcical and uttered to appeal to the Conservative voters who will choose our next Prime Minister. Whether they live beyond that vote is another matter. Until then, we only have to sit and watch as Conservatives battle each other for their throne.🔷
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