When Geoff Hurst scored the final, sensational goal in the 1966 world cup final, it felt great. But what made that year even better was that we were paying a great deal less tax than we are now.
One way of putting it is to say that, in 1966, people worked up until May 2nd to pay their tax and from then on, they worked for their own benefit. On the day when Nobby Stiles and Martin Peters exhausted themselves in pursuit of glory, every taxpayer had already enjoyed a long period of earning money for themselves and their families.
How things have changed. The world cup is nearly upon us and still we have not reached what has been christened ‘Tax Freedom Day’. It will not come until tomorrow [saturday] according to the Adam Smith Institute, which works it out each year. That is more than a month later than it was 40 years ago.
Despite the rise in taxation, yesterday George Osborne, the Conservative Shadow Chancellor of the Exchequer, announced that at the time of the next election, Tory promises of tax cuts are “very unlikely to be on offer”. He emphasised ‘stability’ and, though he talked of going in the ‘direction’ of tax reductions, it sounded about as determined as Tracey Temple’s resistance to John Prescott.
Mr Osborne has meekly accepted the way in which Gordon Brown has increased taxation and now appears to think it is not such a bad thing. Astonishingly, he has moved Tory policy so far on this that he now finds even some people in the Labour party take a tougher line than he does.
Derek Scott, Tony Blair’s own former economic adviser, has accused Gordon Brown of creating an economy in which ‘excessive public spending, higher taxes and intrusive micromanagement are gradually taking their toll’.
Gisela Stuart MP, a former junior minister, said earlier this week that high taxes and and spending could lead to ‘future stagnation’. She warned of complacency after years of apparent economic success.
She should know. Gisela Stuart was born in Velden, Germany. She has seen how her home country got complacent after years of apparent economic success and consequently lapsed into its current, long-lasting economic stagnation.
In 1966, Germany lost to England in the world cup final, but it was universally regarded as the easy winner in the race for economic prosperity after the devastation of the second world war. Its fabulous economic growth came in the wake of economic management by Ludwig Erhard. He believed in low regulation and low taxes. Erhard did away with price controls overnight. He was all for free enterprise and, as a result, Germany thrived. The people of Germany became far richer than the British.
Then Germany started taking its prosperity for granted and had a succession of Left-wing governments which increased taxes and regulations. At first there was little effect. But gradually, Germany began to slow down. Meanwhile in 1979, Britain elected Margaret Thatcher who set about doing the exact opposite. The British position was turned around. From being the sick man of Europe, Britain started to catch up again. Instead of us worrying about how we should copy France or Germany, those two countries began to admire this country, instead.
But now that era is over, too. Both countries have changed direction again. Gordon Brown has been increasing our taxes while, in Germany, they have been cutting back. We have now reached the point of cross-over, when German taxation is becoming lower than British as a proportion of the national economy.
The result is inevitable. Gradualy, British growth will tail off. The more that Mr Brown raises taxes, the slower our economy will develop. It is already starting. When Labour came to power, economic growth tended to be higher than most people expected and above that of the rest of Europe. Now there are few happy surprises and our performance no longer shines so brightly.
Most of us don’t realise the full extent of how much we pay in tax. The standard tax rate of 22 per cent is only the tip of the iceberg. We also pay National Insurance, which has become a tax by another name. Many people who do pretty well in their careers are surprised how quickly they find themselves paying the top rate of tax of 40 per cent. The pay of all of us is reduced because the companies which employ us must pay corporation tax and other taxes. And when we spend our earnings, we have to pay VAT or other duties. Even when we die, some two million of us now have estates that would be liable to inheritance tax. Add all that up together and we get to the daunting figure of 42 per cent of the national economy disappearing in tax.
Tax dampens our incentives to work and create new businesses. It damages the profits of enterprises so they are less able to compete and invest.
Lower taxes are not just about you and I having a little more take-home pay. They are about the future prosperity of this country.
If only tax were much lower, as it was a century ago, the British would probably enjoy bigger personal incomes after tax than the citizens of any other major country in the world. That is an assertion based on an OECD estimate of the damaging effect which taxation has on growth.
As taxes slide upwards, this is no time for the Conservative Party to lose sight of the fact that tax levels are vitally important. The country is in increasing danger of getting used to the idea that heavy taxes are fine. They are not. They are the enemy not only of our own living standards, but those of our children and grandchildren.
This is the unedited version of the article that appears in today’s Daily Express.