Tax Dispute Rumbles on at Westminster

two important blokes
Brown & Cameron

By Michael Heggie

A Conservative proposal to cut payroll taxes for businesses that take on unemployed people was dismissed by the Prime Minister, who argued that it would not inject new cash into the economy.

A Conservative proposal to cut payroll taxes for businesses that take on unemployed people has been dismissed by Mr. Brown.

The global downturn has prompted the government to consider borrowing to lower taxes. Prime Minister Gordon Brown insisted that the very point of using tax cuts is to stimulate the ailing British economy.

The Prime Minister declared at his monthly press conference: “You have to take action that is initially unfunded. That is the idea of a fiscal stimulus”

But Mr Cameron says that Britain cannot afford to add to public debt – which could put the Tories in the unfamiliar position of having the least aggressive tax-cutting stance.

Mr Cameron said: “Unfunded tax cuts will saddle this generation and the next with a burden of debt that could take a decade or more to pay off.”

He insists that unfunded tax cuts now will mean higher levies later, a claim that Tony McNulty, the Employment Minister, appeared to confirm when he agreed that taxes would have to rise “over the longer term”.

Mr Brown again fuelled speculation that Alistair Darling would announce tax cuts in the PreBudget Report, expected this month.

At the Conservatives’ annual conference both Mr Cameron and George Osborne, the Shadow Chancellor, insisted that they would not change direction, arguing that Britain should return to the “fiscal conservatism” of Margaret Thatcher.

With tax cuts now expected this month and amid the depressing economic backdrop, the Tory leadership wanted to signal that they too would help people through the downturn. Mr Cameron and Mr Osborne proposed national insurance holidays for companies that hired the unemployed, claiming the measure would create 350,000 jobs.

David Frost, chairman of The Federation of Small Businesses, said: “Small businesses would be better helped by long-term reductions in national insurance contributions rather than short-term breaks. Encouraging businesses to employ those out of work for three months could provide a disincentive to take on those entering unemployment.”