Tax 'ball and chain' holds Europe back

Lower taxes create economic dynamism - Portillo

High European tax rates mean the continent is trying to compete in the global marketplace wearing a ball and chain, shadow chancellor Michael Portillo has said.

In a speech in Madrid, Mr Portillo claimed taxes were rising in Britain at a time they needed to be cut to increase growth.

People seem preoccupied about how to spend the fruits of our prosperity, without thinking how to create that prosperity in the first place

Michael Portillo

He said: "The challenge for European governments is to shift the focus away from over-promising on government spending towards how to reduce the burden of tax so as to promote higher economic growth.

"Until that issue is addressed, Europe will have to endure a massive disadvantage in its tax burden compared with the United States and must compete in the global marketplace wearing a ball and chain."

Booze cruise

Mr Portillo went on to warn that "global forces" are eroding the ability of governments to increase taxes.

He said: "In Britain, income tax is now politically untouchable. Duties on share dealing and on gambling are being eroded by internet competition. Capital gains tax will have to respond to international tax competition.

"Many people do all they can to avoid paying indirect tax by purchasing beer and cigarettes from so-called 'booze cruises' across the English Channel.

"And throughout Europe there have been protests against the high level of road fuel taxes."

Mr Portillo continued: "Added to this, recent months have seen the return of an unhealthy `British syndrome'.

"People seem preoccupied about how to spend the fruits of our prosperity, without thinking how to create that prosperity in the first place.

"The idea has taken root that better public services require higher taxes as though we hadn't learnt in the 1980s that tax-cutting programmes produce economic dynamism and higher tax receipts," he said.