The economy has dominated every newspaper, news bulletin and political debate for the last month. Incomprehensible figures have become part of daily life and the nationalisation of banks and stocks has become an accepted economic and political mechanism to promote stability in the market.
In our communities, people are scared about what is going to happen in the long term and whether they will still be employed by Christmas. As the party that seeks to both protect and enhance the lives of working families, it is our responsibility to do everything we can to reassure the country and protect the wider economy. However, as the state of the global markets and the banking sector is changing faster then I can type I will not tempt fate by focusing on the current economic developments. Rather I think one of the most interesting spinoffs of the current economic crisis has been a focus on our public finances and a genuine debate about the tax regime.
At party conference the current economic instability encouraged discussions about the current tax regime for the first time since 1992. Jon Cruddas MP called for a new higher rate of 45 per cent for those earning over £175,000 to fund tax cuts for middle and lower income families. Polly Toynbee is advocating a 50 per cent tax rate for those earning over £100,000.
The Tories have also jumped on the bandwagon by announcing a freeze on council tax rises (paid for by ending public information advertising campaigns apparently…) and the SNP have pledged to introduce a local income tax replacing council tax by 2012. Even the Lib Dems are calling for tax cuts (which unsurprisingly aren’t costed).
Of course the intensity of recent events makes talk of any tax cut immature, if not totally irresponsible. However, what it has demonstrated is that all political parties and commentators are only focusing on one half of the debate.
There appears to be a total disconnect between an individual’s tax burden and what government, either local or national, chooses to do with public finances. As a political class we have failed. We know that as an electorate people do not trust politicians and after recent scandals they definitely have concerns about allowing us to spend their money.
Importantly, due to the incredibly complex nature of our tax system, there is little confidence about taxes funding specific projects – for example, does road tax equate to better roads or is it just a tax raising mechanism?
In the last 12 months we have seen intense calls for: pay rises for public sector workers; more investment in our armed forces; better policing provision to tackle knife crime and antisocial behaviour; investment for community Post Offices and of course more help for the economy and homeowners, to name but a few. These demands have come both from the electorate and the media. But we have failed to articulate that there is one pot of money and that it is directly linked to the amount of tax people pay.
Let’s be clear: I am not advocating that we have thousands of individual taxes to fund each public service; rather I think we need to enter into a new period of openness and transparency with the electorate. Before we engage in any more debates about tax cuts I believe that we need a Grand Commission to both simplify the tax system and to highlight what we actually spend taxpayers’ money on – from health and education to defence and civil infrastructure. One Commission, one debate and a new relationship with the people that pay the bills.
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