Cameron’s latest tax madness

Having tried to argue that the solution to the credit crunch is to discourage borrowing even more, the Tories are now proclaiming that the solution to a collapse in consumer spending is to discourage consumer spending even more. Yes, they want you to stick all your money in the banks (remember them?) and leave it there. That’ll really help all those struggling retailers and get the economy moving again.

David Cameron says:

In order to help deal with Labour's Debt Crisis and help turn Britain from a spend, spend, spend society into a save, save, save society it is time to abolish income tax on savings for everyone on the basic rate of tax

I’m in two minds about the merits of the VAT cut (the main effect of which will be to help businesses protect their margins as they cut prices by even more, rather than encouraging much extra consumer spending). But concentrating precious fiscal firepower (paid for by public spending cuts) on motivating people to save rather than spend is just madness.

Too much spending is really not the problem right now. Just ask all those people who used to work at Woolies.

[Update: Yvette Cooper also thinks this is "madness" - but for different reasons.]