Finally – a serious debate about tax is breaking out

by | Apr 23, 2008 | Progressive Internationalism | 0 comments

Amid all the hullabaloo about the 10p tax rate, there is a danger of not seeing the woods for the trees. For the first time since Blair and Brown created New Labour in 1994, a serious debate about tax is breaking out.

You can see it in the world of the thinktanks, in the pages of the Guardian, and in recent initiatives such as the open letter from academics and wonks in defence of inheritance tax that was signed, among others, by two former Number Ten special advisers. And of course, the editorial of the latest edition of Progress itself proclaims that ‘we need to talk about tax’, although rightly making it clear this needs to be a comprehensive debate about tax covering hypothecation, co-payments and local taxation as well as high earners. The taboo has been well and truly broken.

This is long overdue. For all of New Labour’s success in not only winning elections and making a difference to millions of people’s lives (especially the least well-off in the UK and in the developing world) but also transforming the political landscape, it has always had a few noticeable blind spots; areas of policy where, perhaps because of the wounds inflicted on the current generation of top Labour figures in the 1980s and early 1990s, we have not been able to follow through on the logic of ‘traditional values in a modern setting’.

So, we have been too often been terrified of the agendas of the right-wing newspapers, especially the poisonous Daily Mail; we have, until recently, been pretty rubbish on environmental issues, often reining back on green policies at the behest of the jurassic tendency in the business community, only to leave our flank so exposed to changes in social attitudes that David Cameron can don the environmental mantle and proclaim ‘vote blue, go green’ with a straight face; we were slow to pick up on the massive unmet demand for flexible working as people seek both to make ends meet and spend more time with their kids, and we still have more to do to support working parents; and we’ve been terrified to talk about tax, either about how much of it a progressive government really needs, or how the burden of tax should be allocated between different social groups or how fiscal signals and incentives really need to change in order to save the planet.

We risk kidding ourselves that our last two election victories were principally an endorsement of a higher and higher share of GDP being taken in tax, rather than other political factors; we sometimes delude ourselves that there was massive public support for the 1 per cent increase in national insurance to pay for the NHS (if this was so, why was this idea left out of the 2001 manifesto?); and while it’s always fun to flag up the innumerable holes in the policies of the Tories, the idea that their £10 billion of unfunded tax-cut promises would somehow shatter our economy, as some ministers claim, is far-fetched.

Set against annual GDP of £1.2 trillion, George Osborn’s ‘missing £10 billion’ represents real hypocrisy and shows where Tory priorities really lie, but they are not a serious threat to economic stability.

And of course, some of the policies that people on the Left advocate to try and make the tax system and society fairer (such as simply raising the top rate of tax to 50p) may not be the best solutions. Some of the ideas suggested raise very little revenue, or are either totally impractical or would actually have negative unintended consequences, such as leaving the Treasury worse off overall. That doesn’t mean that tax policies that are both more fair and easily implemented do not exist, it’s simply that in recent years precious little intellectual and political effort has been made by the modernising left to address tax reform systematically, especially the admittedly tricky issue of what should be the proper contribution of the wealthiest among us. That needs to change now.
In the spirit of the new debate on tax that is blooming before us, would anybody deny the following series of assertions?
Most people in Labour’s Britain now feel overtaxed, and that was the case even before the cost of living started to rise significantly and the economy started to wobble.

Most people support Labour’s extra spending on public services but are convinced we could achieve the same results with greater efficiency. Most people feel that inequality in Britain is far too great (the latest British Social Attitudes report stated that ‘76 per cent [of people surveyed] think the gap between those on high and low incomes is too large’).

Most people feel that if a Labour government does not make considerable and continuous progress in making Britain less unequal, including through the tax system, there is no point in having a Labour government.

Most people think the least well-off in our society should be paying less tax, and that the richest should be making a larger contribution to the common good, and that was the case well before the bankers and brokers – who make up a big chunk of the richest in our society – decided it was a smart move to bring the financial markets (on which depend, whether we like it or not, everything from our daily bread through our mortgage offers to our pensions) grinding to a halt.

Current levels of inequality are grotesque, and people know it. And the conspicuous consumption of the mega-rich has become a source of concern and resentment to both our working class and our middle-class supporters alike – we need to remind them we understand their struggles and remind them whose side we are on.

Most people can make a distinction between, on the one hand, a modest increase in the taxes imposed on the wealthiest people in Britain (‘the few’, doms and non-doms alike) in order to help every working-class and middle-class child in Britain get the education and opportunities they all deserve and, on the other hand, an all-out attack on wealth creation motivated by envy and spite that would drive talented and dynamic people overseas.

Nobody wants the latter, and surely it is possible and desirable, in early 21st Century Britain, for a Labour government to make the tax system fairer precisely in order to support the aspirations of the majority, rather than being seen as ‘capping aspirations’? If we cannot get that right, we may as well give up on politics altogether.

And finally, most people might seriously consider voting for a party that was able to offer a reform of the tax system that delivered on these propositions – ‘sharing the proceeds of growth’ is not such a bad idea, we just need to make sure that it’s done by a Labour government and based on Labour values, not by a Cameron/Osborne team who are public service slashing Thatcherites at heart.

And Labour promising such a reform of tax at the next General Election may not be enough – we really need to start doing it in this Parliament, to show the public that we mean it and that we can pull it off. I worry that many people in Middle Britain will be tempted to vote Tory at the next General Election precisely because they believe that Cameron/Osborn will give them some sort of tax cut, regardless of whether the Tories makes explicit or meaningful promises in their Manifesto.

There can be no doubt that Number Ten and Number Eleven know these issues need to be addressed, nor that their progressive instincts want to do the right thing while at the same time shoring up our electoral coalition of ‘the many’.

The only question is this: can we come up with the right policies to achieve this, and will the economy return to a high-enough rate of growth to allow Labour to maintain investment, reduce the overall tax burden and to rebalance the fiscal system still further in a pro-poor, pro-opportunity direction in time for 6 May 2010?

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Finally – a serious debate about tax is breaking out

by | Apr 23, 2008 | Young progressives | 0 comments

Amid all the hullabaloo about the 10p tax rate, there is a danger of not seeing the woods for the trees. For the first time since Blair and Brown created New Labour in 1994, a serious debate about tax is breaking out.

You can see it in the world of the thinktanks, in the pages of the Guardian, and in recent initiatives such as the open letter from academics and wonks in defence of inheritance tax that was signed, among others, by two former Number Ten special advisers. And of course, the editorial of the latest edition of Progress itself proclaims that ‘we need to talk about tax’, although rightly making it clear this needs to be a comprehensive debate about tax covering hypothecation, co-payments and local taxation as well as high earners. The taboo has been well and truly broken.

This is long overdue. For all of New Labour’s success in not only winning elections and making a difference to millions of people’s lives (especially the least well-off in the UK and in the developing world) but also transforming the political landscape, it has always had a few noticeable blind spots; areas of policy where, perhaps because of the wounds inflicted on the current generation of top Labour figures in the 1980s and early 1990s, we have not been able to follow through on the logic of ‘traditional values in a modern setting’.

So, we have been too often been terrified of the agendas of the right-wing newspapers, especially the poisonous Daily Mail; we have, until recently, been pretty rubbish on environmental issues, often reining back on green policies at the behest of the jurassic tendency in the business community, only to leave our flank so exposed to changes in social attitudes that David Cameron can don the environmental mantle and proclaim ‘vote blue, go green’ with a straight face; we were slow to pick up on the massive unmet demand for flexible working as people seek both to make ends meet and spend more time with their kids, and we still have more to do to support working parents; and we’ve been terrified to talk about tax, either about how much of it a progressive government really needs, or how the burden of tax should be allocated between different social groups or how fiscal signals and incentives really need to change in order to save the planet.

We risk kidding ourselves that our last two election victories were principally an endorsement of a higher and higher share of GDP being taken in tax, rather than other political factors; we sometimes delude ourselves that there was massive public support for the 1 per cent increase in national insurance to pay for the NHS (if this was so, why was this idea left out of the 2001 manifesto?); and while it’s always fun to flag up the innumerable holes in the policies of the Tories, the idea that their £10 billion of unfunded tax-cut promises would somehow shatter our economy, as some ministers claim, is far-fetched.

Set against annual GDP of £1.2 trillion, George Osborn’s ‘missing £10 billion’ represents real hypocrisy and shows where Tory priorities really lie, but they are not a serious threat to economic stability.

And of course, some of the policies that people on the Left advocate to try and make the tax system and society fairer (such as simply raising the top rate of tax to 50p) may not be the best solutions. Some of the ideas suggested raise very little revenue, or are either totally impractical or would actually have negative unintended consequences, such as leaving the Treasury worse off overall. That doesn’t mean that tax policies that are both more fair and easily implemented do not exist, it’s simply that in recent years precious little intellectual and political effort has been made by the modernising left to address tax reform systematically, especially the admittedly tricky issue of what should be the proper contribution of the wealthiest among us. That needs to change now.
In the spirit of the new debate on tax that is blooming before us, would anybody deny the following series of assertions?
Most people in Labour’s Britain now feel overtaxed, and that was the case even before the cost of living started to rise significantly and the economy started to wobble.

Most people support Labour’s extra spending on public services but are convinced we could achieve the same results with greater efficiency. Most people feel that inequality in Britain is far too great (the latest British Social Attitudes report stated that ‘76 per cent [of people surveyed] think the gap between those on high and low incomes is too large’).

Most people feel that if a Labour government does not make considerable and continuous progress in making Britain less unequal, including through the tax system, there is no point in having a Labour government.

Most people think the least well-off in our society should be paying less tax, and that the richest should be making a larger contribution to the common good, and that was the case well before the bankers and brokers – who make up a big chunk of the richest in our society – decided it was a smart move to bring the financial markets (on which depend, whether we like it or not, everything from our daily bread through our mortgage offers to our pensions) grinding to a halt.

Current levels of inequality are grotesque, and people know it. And the conspicuous consumption of the mega-rich has become a source of concern and resentment to both our working class and our middle-class supporters alike – we need to remind them we understand their struggles and remind them whose side we are on.

Most people can make a distinction between, on the one hand, a modest increase in the taxes imposed on the wealthiest people in Britain (‘the few’, doms and non-doms alike) in order to help every working-class and middle-class child in Britain get the education and opportunities they all deserve and, on the other hand, an all-out attack on wealth creation motivated by envy and spite that would drive talented and dynamic people overseas.

Nobody wants the latter, and surely it is possible and desirable, in early 21st Century Britain, for a Labour government to make the tax system fairer precisely in order to support the aspirations of the majority, rather than being seen as ‘capping aspirations’? If we cannot get that right, we may as well give up on politics altogether.

And finally, most people might seriously consider voting for a party that was able to offer a reform of the tax system that delivered on these propositions – ‘sharing the proceeds of growth’ is not such a bad idea, we just need to make sure that it’s done by a Labour government and based on Labour values, not by a Cameron/Osborne team who are public service slashing Thatcherites at heart.

And Labour promising such a reform of tax at the next General Election may not be enough – we really need to start doing it in this Parliament, to show the public that we mean it and that we can pull it off. I worry that many people in Middle Britain will be tempted to vote Tory at the next General Election precisely because they believe that Cameron/Osborn will give them some sort of tax cut, regardless of whether the Tories makes explicit or meaningful promises in their Manifesto.

There can be no doubt that Number Ten and Number Eleven know these issues need to be addressed, nor that their progressive instincts want to do the right thing while at the same time shoring up our electoral coalition of ‘the many’.

The only question is this: can we come up with the right policies to achieve this, and will the economy return to a high-enough rate of growth to allow Labour to maintain investment, reduce the overall tax burden and to rebalance the fiscal system still further in a pro-poor, pro-opportunity direction in time for 6 May 2010?

Submit a Comment