Why Balls is right to explore a wealth tax

Wealth taxes are fairer than those on income and they stimulate growth.

So far, beyond a pledge to restore the 50p tax rate, we've heard surprisingly little from Labour on the future of the tax system. But that changes with Ed Balls's interview in today's Independent. Whilst dismissing the wealth tax proposed by Nick Clegg as "not in the real world", he reveals that Labour is considering adopting a version of Vince Cable's mansion tax. "The likes of a mansion tax need to be on the table to be looked at," Balls tells the paper. He adds that he wants to begin "discussions" with the Business Secretary as soon as possible.

The person thinking seriously about this was not Nick Clegg but Vince Cable. I feel for Vince and the extent of his frustration [with the Coalition]…but if he wants to channel those frustrations into discussions about how we can achieve growth and jobs in the future I'll start discussions with him tomorrow.

Ball's announcement is an encouraging one. Here at the NS, we've long argued that the burden of taxation should be shifted from income towards wealth and assets (see NS editor Jason Cowley's 2010 cover story on the subject). Wealth taxes are harder to avoid than those on income (even the most determined tax avoider cannot move his or her mansion to Geneva), are progressive (wealth is even more unequally distributed than income), and benefit the economy by shifting investment away from unproductive assets and towards wealth-creating industries. For the psephologically minded, it's also worth noting that high-end property taxes are popular. A Sunday Times/YouGov poll found that 63 per cent of the public (including 56 per cent of Tories) support a mansion tax, with just 27 per cent opposed.

But, like Ed Miliband in his interview in this week's New Statesman, Balls is also clear that Labour cannot rely solely on the tax system to reduce inequality. The shadow chancellor joins Miliband in referencing the zeitgeisty theme of "predistribution" - the belief that state, rather than merely ameliorating inequalities through the tax and benefits system, should act to ensure they do not arise in the first place.

As I wrote in my blog on the subject last night, Balls and Miliband advance two main arguments for this shift of emphasis. Firstly, that the failure of the last Labour government to reduce inequality means that while redistribution is necessary (and will remain so) it is not sufficient, and secondly, that the fiscal constraints a Labour administration would face (based on current forecasts, it would inherit a deficit of £96.1bn or 5.8% of GDP) mean that it will be not able to increase tax credits (the last Labour government's primary redistributive instrument) in the manner that Tony Blair and Gordon Brown did.

As I note: "The great strength of predistribution is that it does not cost the state a penny to pursue. Rather than relying on taxation to narrow the gap between the rich and the poor, Labour will harness the instruments of legislation and regulation. Rail companies, for instance, would be barred from raising fares by more than 1% above inflation."

Expect to hear lots more on the subject when Balls and Miliband address today's Policy Network conference at the London Stock Exchange.

Shadow chancellor Ed Balls said "the likes of a mansion tax need to be on the table".

George Eaton is political editor of the New Statesman.

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The 5 things the Tories aren't telling you about their manifesto

Turns out the NHS is something you really have to pay for after all. 

When Theresa May launched the Conservative 2017 manifesto, she borrowed the most popular policies from across the political spectrum. Some anti-immigrant rhetoric? Some strong action on rip-off energy firms? The message is clear - you can have it all if you vote Tory.

But can you? The respected thinktank the Institute for Fiscal Studies has now been through the manifesto with a fine tooth comb, and it turns out there are some things the Tory manifesto just doesn't mention...

1. How budgeting works

They say: "a balanced budget by the middle of the next decade"

What they don't say: The Conservatives don't talk very much about new taxes or spending commitments in the manifesto. But the IFS argues that balancing the budget "would likely require more spending cuts or tax rises even beyond the end of the next parliament."

2. How this isn't the end of austerity

They say: "We will always be guided by what matters to the ordinary, working families of this nation."

What they don't say: The manifesto does not backtrack on existing planned cuts to working-age welfare benefits. According to the IFS, these cuts will "reduce the incomes of the lowest income working age households significantly – and by more than the cuts seen since 2010".

3. Why some policies don't make a difference

They say: "The Triple Lock has worked: it is now time to set pensions on an even course."

What they don't say: The argument behind scrapping the "triple lock" on pensions is that it provides an unneccessarily generous subsidy to pensioners (including superbly wealthy ones) at the expense of the taxpayer.

However, the IFS found that the Conservatives' proposed solution - a "double lock" which rises with earnings or inflation - will cost the taxpayer just as much over the coming Parliament. After all, Brexit has caused a drop in the value of sterling, which is now causing price inflation...

4. That healthcare can't be done cheap

They say: "The next Conservative government will give the NHS the resources it needs."

What they don't say: The £8bn more promised for the NHS over the next five years is a continuation of underinvestment in the NHS. The IFS says: "Conservative plans for NHS spending look very tight indeed and may well be undeliverable."

5. Cutting immigration costs us

They say: "We will therefore establish an immigration policy that allows us to reduce and control the number of people who come to Britain from the European Union, while still allowing us to attract the skilled workers our economy needs." 

What they don't say: The Office for Budget Responsibility has already calculated that lower immigration as a result of the Brexit vote could reduce tax revenues by £6bn a year in four years' time. The IFS calculates that getting net immigration down to the tens of thousands, as the Tories pledge, could double that loss.

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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