Whatever happened to the Laffer curve

One of economic theories John Swinney and George Osborne both agree on is the Laffer Curve. 

It is of course attractive to politicians because it suggests that tax cuts can actually increase government revenue. Sadly for both of them, some forty years after Laffer’s napkin scribbling, the evidence is limited - well actually non-existent.

Sad person that I can be, my bedtime reading in my London hotel is the OBR's December 2013 'Economic and Fiscal Outlook'. What better place to look to see if the independent OBR thinks George Osborne's planned Corporation Tax cuts will increase revenue in real terms.

They say:

"However, we still expect onshore corporation tax receipts to fall as a share of GDP from 2.2 per cent in 2013-14 to 2.1 per cent by the end of the forecast. This partly reflects further reductions in the main rate of corporation tax to 20 per cent by 2015-16."

And here is a nice table that gives you all the figures.

So while the Scottish Government's White Paper yet again churns out the merits of a Corporation Tax cut, we can see that even a true believer like George Osborne is struggling to deliver the same policy.