Leading article: The looming battle to prove fiscal credibility

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It is hard as yet to pin down, but something is definitely wafting around in the political air - something in the general area of taxation, the feel-good factor and the business climate in Britain. Yesterday both the Chancellor, Gordon Brown, and the Conservative leader, David Cameron, were courting the City in one way or another. Mr Brown hosted a new task force of leading financiers at Number 11 Downing Street. And Mr Cameron was in Westminster, holding out the prospect of substantial tax cuts, as a taster for today's launch of the party's tax reform commission's report.

Party officials had earlier confirmed that their proposals would include the abolition of stamp duty on share dealing as a priority. How much further the cutting might go - and how it might be paid for - will become apparent only after today, and probably not for a good many months yet. Mr Osborne has been adamant that he will steer clear of making Budget commitments so far ahead of an election.

The veritable cornucopia of promises Mr Brown offered to his task force on financial services yesterday, however, suggests that something is up. While apparently ruling out the abolition of tax on share-dealing - which regularly comes close to the top of the City's wish-list - Mr Brown announced a review of the way the tax authorities deal with the business community. He also held out the prospect of a 25 per cent reduction in regulatory red tape and new investment in the transport infrastructure that is regarded internationally as one of London's greatest liabilities. The significance of this meeting is not just that it took place, but that the Treasury trailed it so in such lavish detail in advance.

The background to this flurry of activity is, of course, partly that there is a genuine contest for public support now that the Conservative Party is doing so much better in the polls. But it also seems to reflect growing unease in the business community that, internationally, Britain may be losing its competitive edge, and the fear - among voters at large - that the economic boom we have enjoyed for the past decade may be coming to an end and that there have been too many stealth taxes.

Thus far, these are no more than straws in the wind. Surveys that show the personal tax burden now weighing heavier in Britain than in conventionally high-tax EU countries such as Germany. And British unemployment, which is on the rise, even though the number of new jobs has also grown. And also the economic revival, so far only tentative, in France and Germany - countries, we have long been told, that needed to shake themselves out of their torpor and adopt the more flexible ways of the British labour market. And the competition for investors from countries with low corporate tax, such as Ireland and those of the "new" Europe.

With foreign investment in Britain currently at a record level, the financial services sector flourishing, and unemployment still low by the standards of many of our European neighbours, Britain in general, and the City in particular, would appear to be in rude economic health by most conventional indicators. Nor are business leaders any less prone than other people to issuing dire warnings of trouble if they think that the man who holds the purse-strings is listening.

It is also true, though, that in politics perception is as important as reality, and even vague feelings of trepidation, when shared by big business and middle-income earners, are indicators that no government can afford to ignore. This is doubly so when the Chancellor has his eyes on the top job and his credibility rests in large part on its reputation for competent management of the economy. Nothing, in this case, can be left to chance.

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