Article written for the Bruges Group

Taxation is theft. It is legalised theft, having the full force of the State behind it. Most people would not want to spend their income in the way the government presumes to spend it before them. Most people would not be prepared willingly to send to the State the amount of money it demands from them. So it demands the money with menaces. Non payment would result in a fine and demands for further payments. A further failure to pay would end up with the individual placed in prison, detained against their will. The State reserves the right to look at your bank accounts, to check out your income, to raid your house, to open your filing cabinets, to demand that you answer all its questions, to require you to fill up extremely long forms and above all, requires you to send it your money on a regular basis.

Taxation takes precedence over all other claims on your income and estate. You cannot ring up the taxman and say “I really do need to buy a new bed this month, so can I defer paying you until next”. You cannot suggest to the tax man that you would like a little more food and therefore rather fewer spin-doctors. You cannot challenge, as an individual, what the government spends, or even persuade them to tell you in detail how your money is spent. It just goes into a general pot, supporting the huge expenditures of the State machine.

The way tax is raised and levied should warn people that it is neither a popular nor a particularly good idea. Anything that requires that amount of brute strength to prise it from people should leave one suspicious. If we all felt that every penny of our money was indeed buying us a perfect hospital service, a wonderful education for our children and keeping our streets safe at night, we would undoubtedly part with the money much more willingly. Indeed, if such services were available and of sufficiently high quality, we would undoubtedly pay for them directly ourselves and be happy to receive them. It is because State services are so amorphous, so badly run and in many cases, so wasteful, that people are reluctant to give their money to the government. Many spend a great deal of their time and energy seeking to minimise their tax burdens legally, seeking to delay payments of tax and complaining about the impositions placed upon them.

It has often been said by the political classes that people in Britain are very happy to pay tax and that many would like to pay more tax in return for better public services. It is difficult to believe these claims about public opinion. Whilst it is undoubtedly the case that people are inclined to tell pollsters that they would be happy to pay more tax for better public services, it neither means that they personally wish to pay more tax, nor does it mean they believe that paying more tax would buy them those better public services they would like. People answer the opinion pollsters in this way for three reasons.

Firstly, they believe it is the politically correct answer and they are all, to some extent, influenced by the political correctness retailed by the government and much of the media on a continuing basis. Secondly, there is an element of wish and hope in what they are saying. Of course it would be nice if public services were improved and if the fairy story were true that paying more tax would produce a demonstrable leap forward in the quality of public services, many people might indeed be happy about that. However, if you ask them specifically whether they think these things are likely to happen, most people very sensibly say, “no”. The bitter experience of having paid much more tax in the past and not receiving the better services has taught them this truth. Thirdly, there is an element in some answers that implies the neighbours are probably better of than they and it would be good if they paid more tax. Many people when answering surveys do not have in the forefront of their mind the fact that higher taxes would be paid by them directly.

We can see this must be true when successive governments have come forward with opportunities for people to pay more tax. If the pollsters were right, governments which offered higher taxes with more spending on public services would be popular and re-elected and the individual decisions to increase taxes would be praised. This is not seen to have been the case in recent experience, when both the Conservative government of John Major and the Labour government of Tony Blair offered people plenty of opportunities to pay more taxes, but received little or no praise for doing so.

In recent political history, we first discovered just how deeply unpopular paying more tax for better services is when Margaret Thatcher introduced the Community Charge, or so-called poll tax. The principle behind the Community Charge was to give millions of people the chance to pay taxes for better public services locally, important things like education and social services. There were people who did not have the opportunity to pay tax under the old property tax system. Margaret Thatcher literally planned to enfranchise millions of non-taxpayers into the business of making a direct tax contribution for local services, thereby expanding the tax base and allowing local authorities, who wished to do so, to raise more. Far from being popular, there was universal recrimination and denunciation. The Left, who favour more people paying more tax for better public services, were particularly vociferous in their condemnation, complaining that millions of people who had not been paying tax would then have to pay it. No council found it easy to put forward the idea of a higher Community Charge for better public services and most backed away and joined the campaign to get rid of the tax altogether.

The next opportunity for the pollsters to be proved right came when John Major, following the failure of the disastrous Exchange Rate Mechanism bi-partisan economic policy, decided to deal with the problems by imposing extra taxation and spending this on the most vulnerable people in the community through better benefits and better public services. Far from the public breathing a collective sigh of relief and saying it was wonderful, there was again very strong criticism. The Labour Opposition did not welcome it, although they had led everybody to believe over the preceding ten years that the biggest problem with the Conservative government was not raising enough tax and spending enough money in the public sector. Once faced with the opportunity to support the Conservative government raising taxes and increasing spending, the Labour Party condemned the tax rises and ran a very effective campaign from the early 90s up to the 1997 election against the Conservatives for having broken their tax promises.

The Labour Party was particularly shrill in its condemnation of a very green tax, the imposition of VAT on energy. Many people had said that the price mechanism and the tax mechanism should be used to force people to cut back on their energy requirements to help save the planet. Once the government was foolish enough to do this, it emerged that this was a deeply unpopular policy with many Conservatives, let alone Labour and Liberal Democrat supporters. So great was the pressure against it, the government lost the vote and had to back down over part of the imposition. Left wing critics turned from saying the government was not green enough to saying it was not fair to impose an energy burning tax on the poor and needy, who were clearly going to have to pay it as well as the rich and profligate.

Nor has Gordon Brown had much more success with his so-called ‘stealth taxes'. It is interesting that the incoming Labour government felt it had to promise the nation no overall increase in taxation. They did so because they correctly judged that the public does not like paying higher taxes and correctly ignored those elements in the opinion polls which told them that higher taxes were popular.

Gordon Brown then set about trying to find ways of raising revenue which he hoped would not be noticed and would not be construed as breaking his general pledge on taxation. In the 2001 election, the government was a bit more careful, saying it would not increase income tax rates, but it refused to rule out increases in other taxation, especially National Insurance, which is almost the same as imposing a higher income tax itself.

The government's decision to tax people pension funds turned out to be as ruinous as it was unpopular. Their decision to raise a big levy on the telecoms industry damaged jobs and investment in the leading sector of the economy and their more recent decision to impose a big increase in National Insurance is producing a further twist downwards in the number of factories open and manufacturing jobs available in the United Kingdom.

TAXATION AND ECONOMIC GROWTH

The biggest reason to pursue a low tax policy in any country is that it is the best means of creating economic success and fast growth. From the late 1940s to the early 1990s, Europe conducted an important experiment for world economists to watch. On the eastern side of the great divide, the Communists states clustered under the Common Market and single currency of the Soviet Union. They tried the planning and high taxation route to economic progress. On the western side of the divide, the countries tried a more mixed economic system, with much of their economy subject to free market competition and enterprise and all of it subject to considerably lower tax rates than those applying in the Communist east.

The results of the experiment were overwhelming in their clarity and decisiveness. Eastern Europe and the Soviet Union fell further and further behind, despite the great advantages of planning a single currency and a common market or ComEcon system. They got rid of so-called waste of competition, much of the advertising and duplication of management effort. They had instead a rational planned system where politicians and bureaucrats decided on the quantities and sent out instructions to the nationalised factory units around the States. They made bad decision after bad decision, misallocating resources and failing to find ways of stimulating innovation, greater productivity or hard work. As one of the popular jokes in the eastern bloc went at the time, the State pretends to pay us and we pretend to work. Things were allocated by queue and rationing, rather than by market price. There were notable shortages in the shops and the eastern standard of living fell dramatically behind that in the west.

My visits to the eastern bloc countries when Communism collapsed showed me just how pitiful the system had become. It was dirty, drab, short of the basics and had no sign of the great array of products and services available in a free enterprise western system. The technology was out of date, the products tawdry and badly made and the scarcities dramatic. It was said in Romania that it could take you up to two days to shop to get the basic ingredients for a dinner party because of shortages and queues in all the shops. Few people owned cars and the east missed out on the first wave of home computing and mobile telephony, prior to the collapse of Communism.

At the same time, a less dramatic experiment had been occurring between the United States of America and the Member States of the European Economic Community. The USA decided to run her economy with greater freedom and lower taxes by a considerable margin than many of the founder States of the European Union. As a result, American living standards remained around a third higher than those in the European Union. The United States powered ahead, developing most of the important technical innovations and producing most of the dominant companies of the global economy. It is difficult to see why, after such conclusive evidence, so many people still believe that higher taxation can be anything other than damaging.

Closer to home, we should examine carefully the experience of the Republic of Ireland. Until the end of the 1970s, the Republic of Ireland was in a currency union with the United Kingdom and had tax rates relatively similar to those of much of western Europe. The Republic of Ireland was a relatively poor backwater in the community of western nations, attracting little investment or interest and often exporting many of her people to the United Kingdom or the United States of America. Many of the dynamic and most enterprising people decided it would be better to go to bigger countries in order to make their fortune.

From the early 1980s, two dramatic changes occurred for the Republic of Ireland. First was the decision to establish their own currency and free themselves from the sterling area. The second even more important decision, developed over the years, was to go for a low tax strategy. The Republic of Ireland today has average corporate tax rates about one third of the level of the average of the other European Union countries. This has acted as a mighty magnet to businesses from around the world. Many American corporations are particularly keen to establish themselves in the benign tax climate of the Republic of Ireland, enjoying the advantages of a shared heritage, a common language and above all, much lower tax rates.

The Irish economy has taken off. It has become, over the last two decades, the stellar performer, heading the European Union Member State growth league table and catapulting the Irish people from some of the poorest in western Europe to some of the better off. Once again, the evidence is there for all to see that low taxes produce greater prosperity. Indeed, so great can the impact be on the levels of national income and prosperity, that after a period of years, a lower tax country raises more money in overall taxation at its lower rates, than a similar sized high tax country does, held back as it is by taxation itself. This was dramatically true when comparing the United States of America with the Soviet Union. Much lower tax rates in America raised far more money from US people for public service provision than the very high tax rates of the Soviet bloc raised from the USSR, given the much lower levels of national income.

HOW TAXATION DOES SPECIFIC DAMAGE

There is abundant evidence from the United Kingdom that individual taxes can do considerable damage to particular sectors and groups of people or businesses. Gordon Brown's stealth tax strategy has concentrated the impact of high taxation quite narrowly in certain sections of the economy and on certain activities. The results have been devastating.

His decision to take £5000 million a year taxation out of pension funds in Britain has had a very deleterious impact on the overall savings rate and upon the financial solvency of many pension funds. We have moved from a world five years ago, where most people could look forward to a good level of pension in retirement from their employers' pension schemes to a world of great uncertainty, where many people are now facing retirement with around half the pension entitlement they were anticipating. Many pension funds are being closed to new members, other pension funds are reigning back on amount of benefit they are prepared to pay out. Many companies are facing huge liabilities with a requirement to pay in large sums of money to make good the pension fund that they find it very difficult to raise from their customers.

Whilst the general collapse in world stock markets did considerable damage to British pension funds, there is no denying the additional impact from British pension funds of a large tax imposition and its knock-on impact on the valuation of British company shares. The British stock market fell further and faster than the US stock market on the back of the tax decisions and at the same time, company pension funds were denuded of £5000 million a year they desperately needed to try and keep up with the gap between liabilities and assets.

Even greater chaos was wrought in the telecoms sector when Gordon Brown imposed a £22000 million one-of windfall tax on the principal companies. He designed an extremely clever auction for licences. Companies were told that if they wished to have access to the radio spectrum in order to carry out development of the new 3G mobile networks, they had to submit a bid. This was shortly afterwards followed by the German government doing exactly the same thing, charging them an additional £28000 million to carry out their business in Germany.

The conduct and design of the auctions was very clever. There were fewer licences than companies and consortia wishing to bid. The predictable happened and the companies were forced into grotesque over-bidding. The large sums of money extracted from the industry at a crucial time in its development coincided with a shake out in the world of the Internet, which had got overblown for a variety of reasons. The resulting collapse in share prices and ability to finance the companies coincided with the government's greedy raid upon them. This in turn did more damage to company pension funds. Investment programmes had to be slowed or cancelled. Staff were laid off or sacked and the introduction of the new networks and technology suffered as a direct result. Several of the companies have still not recovered and some of them have gone bankrupt.

Gordon Brown's stamp duty tax is also beginning to do damage to the housing market. The decision to impose a 4% tax on anyone swopping houses worth more than £500,000 was a deliberate attempt to tax London and the South East, where house prices have for some time been a lot higher than elsewhere in the country. In the centre of London, £500,000 does not buy anyone a great deal of housing. For around £500,000 a purchaser might be able to buy a three bedroom flat, but certainly no mansion. Despite this, Gordon Brown's wealth tax was imposed. Housing transactions have been reduced as people have been reluctant to incur the extra tax when buying a new property and house prices in the upper price levels are now falling, partly as a result of the tax imposition and partly other factors.

It's time to examine each major tax and ask what damage does it do and can it be reduced?

1. Stamp duties. This government has gone mad over stamp duties. It is a very old fashioned tax which should be reduced substantially. Stamp duty imposes a levy on trading. It therefore acts as a disincentive to people to rearrange their assets regularly to optimise their use. As a result, it reduces the amount of tax take that comes from taxing the profits of agents and traders in the stock market and property market as it definitely lowers the volume of transactions. The United Kingdom government imposes a half per cent tax on trading in stocks and marketable securities. This is now a major competitive disadvantage for the United Kingdom as most other major stock markets have no such transactions taxed. It should be removed as quickly as possible to restore the competitive advantage of the London stock market.

Stamp duty on houses ranges from 1% up to 4% at over £500,000 value. As we have seen above, the higher this tax goes the more damage it does to the market. It is also very unfair, taxing more expensive parts of the country more highly, whatever the income of the people trying to buy flats and houses there. It is one of the factors preventing younger people buying first time homes at a earlier enough stage in their careers in London and the South East. Thresholds for each level of stamp duty should be raised substantially.

2. Capital Gains Tax. Any capital gain over a threshold recorded by individuals or companies through the ownership of any asset is taxed at standard income tax rates. For many people, this means that if they make a gain on stocks and shares, or on a second home, they end up paying 40% tax on the gain. Under £8000 a gain is exempted, along with principal residences. Individuals are no longer allowed to offset inflation from the increase in value of their asset, so they are to some extent now being taxed upon an inflationary gain which represents no real increase in the value of the item they wish to sell.

Capital Gains Tax acts as a disincentive to people to accumulate wealth or to save. It also distorts wealth creation, encouraging people to put a high share of their wealth into their principal residence, which is exempt. It is therefore a tax against enterprise and a tax on risk taking. If an individual makes investments that go badly wrong, the Revenue does not send him 40% of his losses for Capital Gains Tax is asymmetrical. The Revenue participates substantially in success, but wishes to have no part in failure.

Successful fast growing economies abroad either have low or no Capital Gains Tax. The aim should be to abolish Capital Gains Tax in Britain altogether. It might take some time to reduce public expenditure sufficiently to be able to do so. In the meantime, a new government should move to increase the exemptions, to raise the threshold. Raising the threshold for permitted gains to say, £50,000 a year in the first instance would make an important contribution while still subjecting the large gains recorded by some companies to tax.

3. Corporation Tax. Successive British governments have reduced the rates of Corporation Tax, but the top rate on profits of over £1.5 million still rests at 30%. This is in line with European Union experience and is much higher than successful low tax jurisdictions around the world. Whilst an incoming government could not move to lower the rate or the incidence of Corporation Tax for some time, given the difficulties in getting public expenditure under proper control, the longer term aim should be to move Corporation Tax down to around the 20% mark from the current 30% at the upper end. This would prove a very attractive rate in the competitive world of seeking inward investment. It is interesting that in the last couple of years the flow of inward investment into Britain has reduced dramatically. This is a direct response to the growing uncompetitiveness of the overall tax and regulatory climate in the United Kingdom. The UK is moving from being a relatively low cost, lightly regulated and taxed corporate economy to being a run of the mill, quite highly taxed and regulated economy, in line with other European Union partners. This has had a direct impact upon the attractiveness of Britain as a place for inward investors, who are now more likely to go to the lower cost jurisdictions of eastern Europe, or to tax havens elsewhere.

4. Income Tax. Income tax is levied at a 10% rate on the first £1920 of income, at 22% on incomes up to £29,900 and 40% above that level. These rates are dramatically lower than those imposed by Labour in the 1970s, when the highest rate of income tax was 83%, coupled with an additional 15% surcharge on so-called unearned or investment income. This was not so much taxation as confiscation and ranked alongside the Communist world for its severity. Our lower rates of income tax put us more into the mainstream of mixed economy western countries. They certainly do not make Britain an exciting tax haven in its own right. That would require income tax rates of around half the 40% rate to bring us into line with the most attractive jurisdictions around the world.

Evidence abounds from the United States of America and from low tax places like Hong Kong, Singapore and off-shore crown dependencies in the United Kingdom island chain, that if you take the risk of lowering income tax rates, you attract a great deal of enterprise and risk money to your country. The aim should be to get most people only paying 20% tax as their top rate and to reduce the rate that people on lower incomes pay by raising the thresholds. Whilst this process would take time as public expenditure is adjusted and as the economy picks up in response to the lower tax rates, the first aim should be to exempt people on middle incomes from the 40% tax rate, taking them down to the 20% rate and shifting the threshold between 10% and 20% to a higher level. In due course, the aim would be to get practically everybody other than those on excessively high incomes paying a 20% top rate.

In the 1970s, a large number of individuals and companies moved away from Britain or settled offshore to avoid the penal rates of taxation. The reduction of the top rate from 83% to 60% and then to 40% triggered the reverse process. Many more successful companies and individuals decided to locate in Britain when the tax rates were brought down to something more normal. The world is now a more competitive place and it will require a further move in the direction of low income tax rates to stimulate a concentration of more enterprise and success in Britain.

One of the worst features of Socialist high tax policies is the jealousy that underlies them. There will always be rich people and successful businesses in the world. It is far better that they should wish to locate within your own jurisdiction, where they will then pay some tax and make a contribution to the common good, than have them offshore, or in somebody else's territory where they would make no direct contribution to our economy and public services at all. Jealousy by Socialists is also selective. You do not hear many Socialist politicians hitting out against the very high rewards that David Beckham earns for being a good and well known footballer. However, as soon as someone starts to earn the equivalent from true business success, jealousy predominates and the Socialist mind turns to ways of regulating or taxing him. The aim of economic policy should be to raise the general levels of prosperity and incomes, seeking always to raise the average and to make sure those well below average are looked after through a redistributive benefits system. The State will have more money to do this generously if it has a successful pro-enterprise policy. The most important pro-enterprise policy any country can follow is low tax rates. All the fast growing economies of the world share one thing in common – tax incentives. All the unsuccessful economies of the world share another thing in common – excessive government control, taxation and intervention.

5. Value Added Tax. Value Added Tax is imposed on a wide range of goods and services at a standard rate of 17.5%. Whilst this represents a high charge on some things that people really do need to buy, there could be no prospect of reducing these rates or reducing the incidence of the tax, given the imperatives of reducing directly acting taxes on income, capital gains and transactions. If we can free the economy from some of the clogs on enterprise on the earnings side of the account, we will achieve more than by setting out an early or immediate plan to cut or reduce value added tax.

6. Motoring Taxes. The motorist is singled out for particularly stringent taxation treatment. He pays high fuel duties and VAT on his petrol. He pays high purchase taxes on his vehicle, a congestion charge to drive on the streets of central London, he has to pay an annual fee to licence his vehicle, he has to buy a driving licence for himself and he has to pay to have his vehicle regularly maintained and checked, if it is over three years old. These impositions are done in the combined names of safety and the wish to reduce the number of people using their cars on a regular basis.

An incoming government should make it clear that it does not intend to pursue the vendetta against the motorist by seeing him as an easy source of extra revenue. Whilst it would not be possible to make a material reduction in motoring taxes in the early years of a reforming government, given the priorities on income, an incoming government should pledge that it will not increase the burden of taxation on motoring. It should also examine ways of redistributing and making it fairer.

The current system is not only unfair, but it is also perverse in its consequences and very expensive to administer, given the wide range of different taxes bearing on the motorist. The fairest way of charging the motorist would be to charge all of us on a monthly basis for the use we have made of the main highways in the country. Technology now exists to be able to capture vehicle use on main roads and to send a monthly invoice to people. In return for imposing this charge, it would be possible to remove the licence fee for the vehicle altogether and to cut the taxes on the purchase of new vehicles. We should be encouraging people to buy new vehicles, because they are so much cleaner and more fuel efficient than the old ones they are replacing. There should be a tax incentive for buying a new vehicle and scrapping an old one to continue fast improvement in the fuel efficiency and pollution reduction of the vehicle fleet.

Some will object that removing the licence fee means that we will no longer be able to trace vehicles or police them in the way we are accustomed. Whilst I would recommend the abolition of the tax disc and the yearly charge, I would keep in place a vehicle registry where people had to register their ownership of the vehicle. This would be a worthwhile service for us all, as it would provide proof of ownership when we wished to sell the vehicle and would still allow police access to ownership records when they needed them. There would be a duty on each of us only to contact the register where we were selling the vehicle and there could be a handling charge for the re-registration geared to the actual cost of providing the service.

Removing the licence fee would help those on lower incomes, especially the elderly, who tend to make less daily use of their cars. We need to reduce the cost of owning a car, but to increase the cost of using it a lot on busy and congested highways. Switching the incidence of taxation in the way I have described would do just this, whilst offering people the guarantee that there would be no overall increase in the burden. It would be a much greener policy, promoting the ownership of more fuel efficient vehicles by a tax incentive and penalising excessive use on busy roads. Fuel economy plummets in congested locations as car engines are much less efficient when the car is moving slowly or is stationary with the engine running.

7. National Insurance. National Insurance is levied at the rate of 12.8% on employers on all income above £89.00 per week, at 11% on employees in the income range £89.00 - £585.00 per week and at 1% on employees on income above £585.00 per week. This effectively is another income tax and takes the British rates of income tax up to a standard rate of 33% and a higher rate of 41%. There can be no immediate prospect of a reduction in these rates and the main burden of the policy of reducing income taxation should fall on removing people's liability to income tax itself. National Insurance began as a fund to provide people with certain benefits. Although this is now a somewhat artificial concept, it could be useful in encouraging benefit and social service reform. People could be exempted from part of their national insurance bill if they made adequate alternative provision in the private sector, properly funded or with appropriate insurance premiums being paid. We do have a reduction for opting out of the State pension scheme. We could explore the possibility of similar treatment for people wishing to make their own health care provision, with the proviso that they would have to be a clearly defined insurance policy or fund in place, as we cannot allow anyone to get into a position where they are not paying the State and they are not themselves properly protected.

PAYING FOR THIS REFORM

These changes in taxation require both successful economic growth and reductions in public expenditure compared with the inherited position at the end of the period of Labour government. There is an element of ‘chicken and egg' about the problem. The lower tax rates themselves will generate the more successful economy which in turn, will provide more money for public services at lower rates of tax. However, their introduction would in some cases lead to a short term loss of revenue which needs to be balanced by reductions in public spending. This will not be difficult, given the massive expansion of the State sector, the failure of the government to raise its productivity by very much and the wide range of activities that the State is currently undertaking, but do not need doing, or do not need doing by the State.

It is only possible in this short essay to sketch some of the ideas for reducing the involvement of the State in our daily lives. An incoming government should pass a Statute of Repeals, reducing the volume of regulation and legislation which needs policing. We are greatly over-regulated. Much of the financial regulation in this country could be replaced by a simple Act of Parliament reinforcing the importance of private contract and putting the bulk of financial services under the usual company and theft legislation.

We need a programme of reducing the amount of government we have. All of English regional government including the Regional Development Agencies should be swept away. The structure of local government should be streamlined and the National Civil Service should be reduced from 500,000 to 400,000 in the first instance through natural wastage, a staff freeze and voluntary redundancies. We should reduce the volume of government activity in all those areas, now primarily administered by the European Union. Much of the Department of Trade and Industry is no longer needed, as the bulk of the policies are produced in Brussels. We should examine the benefits system, with a view to reducing the amount of churn in the system. It is an expensive folly to tax people with one hand and to give them money back through benefits with the other. This practice has been greatly extended up the income scale, increasing the number of people suffering from it by this Labour government. It would be better to cut their tax burden and remove the need to pay them so much in benefit.

We need to reduce the range and number of quangos and their activities. Much of the work of the Environment Agency could be properly undertaken by local authorities. We should abolish the Financial Services Agency and return the work of the Food Agency to a combination of central and local government. All too often, we are paying two or three times for competing bureaucracies handling the same issues.

In the transport area, we should rely on the private sector much more. A disastrous experiment with a heavily State subsidised Network Rail needs to be terminated. We will require an entirely private sector owned railway, preferably with some competition between different companies to provide more track space so that the large sums of money needed for railway improvement and modernisation can be raised entirely from the private sector with no government involvement of guarantee. Similarly, we need to return the post office to profit and success, obviating the need for large sums of taxpayers' money to pay the losses or guarantee the bills. This programme of expenditure reductions by cutting the numbers of people, the amount of regulation and the numbers of functions would ensure that every teacher, nurse and doctor we required could be afforded without damaging the budgets of schools or hospitals that are needed to pay for them, whilst at the same time, leaving reductions in expenditure so that we can cut taxes.

As the programme has identified, priorities would be to cut the damaging taxes on enterprise, capital gains and stamp duty and to start to lower the burden of income taxation on both companies and individuals. The way to greater prosperity and therefore to better public services across the board, is by pursuing the low tax, low regulation route. The evidence round the world over many years is quite conclusive. What is surprising, is how many people amongst the fashionable commentators, in the media and in the government, still haven't got the message.