There is nothing that has not at some time been taxed. Windows, greyhounds, jewellery, admission to cricket matches (that one was abolished 50 years ago). It must be some solace to Gordon Brown, as he ponders a looming threat: the public finances are worsening by the month and he may soon have to find a cunning new way of lifting the tax take. In our Victor Meldrew moments, we can all dream up activities and occupations that deserve a good mugging by the taxman. Caravans, burglar alarms, lawyers, fireworks, lawnmowers, insurance companies, roadside poster hoardings and skips are on my personal fiscal hit list.
The good news for the Chancellor is that new taxes can be popular. Ireland's 10p tax on plastic bags has been so successful in cleaning up the streets that fresh imposts on chewing gum, cash-machine receipts and polystyrene burger boxes are planned. Even the hapless Norman Lamont managed to elicit a small populist cheer when he introduced mobile phone tax in 1992 - in the days when the brick-sized devices were still widely hated as yuppie luxuries. (The tax was eventually dropped in 1998.)
The bad news is that the amounts raised by such taxes are piffling. The plastic bag tax has generated only about £10m in the past year. The combined revenues from our own cuddly fiscal measures - landfill tax, the climate change levy and air-passenger duty, which are all designed to encourage green behaviour - amount to just £2bn. This is the equivalent of less than two days' public spending.
Such amounts do not begin to address the potential problem facing the Chancellor. Public spending is rising much faster than tax revenues. Borrowing can take the strain for a while. There is no shortage of people ready to lend HMG money. Premium bond sales, for example, are rocketing and we now bet twice as much on Ernie (the computer that picks the winners) as on the National Lottery. The wholesale money markets have a strong appetite for IOUs with Brown's solid promise on the bottom. After years of paying down the national debt, Britain's credit rating is excellent. But ultimately, the Chancellor is hamstrung by self-imposed rules of fiscal prudence. When he looks like breaching them, he either has to cancel his spending promises (very difficult) or has to whack up taxes (merely difficult). The Treasury insists it won't come to this. Economic growth will keep tax revenues rolling in and the welfare bill in check.
The majority of economists, who say otherwise, may just be plain wrong. They almost all got their growth forecasts wrong in the wake of the Asian and Russian crises of 1998, while the more optimistic Brown was proved correct.
But if the majority is now right, the Chancellor faces a shortfall of many, many billions of pounds. His options are limited. Windfall taxes can make big money. The crackdown on the 30 privatised utilities raised a meaty £5bn at a stroke. But windfalls are, by definition, one-offs. If the economy goes right off the boil, Brown or his successor may need the extra income year after year. Entirely new tax grabs can work for a while. The decision in 1997 to tax pension funds' dividends raised £5bn a year. At the time, pension funds were making such big capital gains on rocketing share prices that no one cared much about dividends. Only now, post-bubble, has the damage become apparent: it amounts to a tax on tomorrow's elderly and has been a major factor in the wholesale dismantling of occupational pension schemes.
The unpalatable truth is that only three taxes have the required money-raising power: income tax, National Insurance and VAT. This fiscal year they are projected to bring in £122bn, £75bn and £67bn respectively. No other tax comes close. Corporation tax raises £31bn, and that may well dwindle as company profits stagnate and companies find new loopholes, aided by the European Court of Justice, which has repeatedly set aside national tax law in favour of international corporations. Fuel duty is the next-biggest earner at £23bn, but after the lorry drivers' protests, ministers know the dangers of duty hikes here. Raising tobacco duty (£8bn) any further just benefits the smugglers, while spirits (£2.4bn) are so heavily taxed already that a hike could actually reduce the tax take as demand slumps.
Income tax looks sacrosanct because of manifesto promises. That leaves just NI and VAT. By abolishing the upper earnings limit on NI in April, Brown opened the door to an easy way of bringing in extra tax from the better-off. As for VAT, an increase, say, from 17.5 per cent to 19 or 20 per cent would raise billions and could be presented as harmonising Britain with the rest of Europe.
But neither is an easy option. One is a tax on jobs, the other is a tax on the poor. It's a grisly choice.
Patrick Hosking is deputy City editor of the London Evening Standard
