Six oddities from the TPA's tax plan

All in all, a slightly strange report.

It turns out the plan of reading the TPA's tax report in full and only then writing on it, while possibly commendable in pursuit of accuracy, is probably not the best thing to do from a journalistic point of view. Many of the best pieces have already been written, particularly Nick Pearce, Tony Dolphin and Daniel Elton's. Nonetheless, there are sufficient oddities that are worth noting for a quick round-up post. In no particular order:

1. Inheritance tax isn't mentioned in the inheritance tax chapter

This one really is just a bit odd. Chapter six is titled Transaction, wealth and inheritance taxes should be abolished. But inheritance taxes are mentioned just once, in the context of an argument against a proposed measure of paying wealth taxes. Their abolition is never proposed, and no arguments are given as to why they are wrong.

But in chapter five, Taxes on capital and labour income disguised as business taxes should be abolished and replaced with a tax on distributed income (snappy titles throughout), there's a five page discussion as to why inheritance tax is so unpopular. I'm not sure what happened with the editing, but it's all very confusing.

2. The Biblical and Quranic arguments for low taxes

Apparently:

It might be argued that God endowed humans with certain inalienable rights, including personal freedom, and that taxation breaches those rights. [Page 98]

Also:

There is no morality in taking someone’s wealth and giving it to another. Such redistribution of wealth is about controlling society, not about helping others. [Page 103]

3. Pigovian taxes

Pigovian/Pigou/externality taxes are something we've covered before. The short version is that some activities affect people beyond those voluntarily partaking in them (creating an "externality"), and that economic efficiency is restored if a government imposes the cost of the externality on the person gaining the benefit from the activity.

The classic example is climate change. Burning a barrel of oil may bring me benefit, but it also causes damage to the planet. The Stern report put the damage at roughly $80 a barrel, and so anyone burning that much oil for less than $80 benefit is, netted out, destroying value. A carbon tax at that level would thus ensure that only oil which was economically beneficial was burned.

The commissioners don't like taxes, though, even economically watertight ones. In the chapter externalities rarely justify taxes as high as they are already, let alone higher, they argue that fuel duty should be cut, and tobacco and air passenger duty should be abolished. All good; although climate change is one of the biggest dangers facing the British economy in the long term, it makes sense to institute a carbon tax with a broad base, rather than focusing the costs on selected industries.

Except they don't argue for that. In fact, they don't argue for any form of carbon tax. Instead, two red herrings are put out. Firstly, that no tax on externalities can raise revenue and change behaviour at the same time (which is true, and something some supporters of the Robin Hood tax would do well to accept), and secondly that many taxes on externalities hit the poor hardest (which is true, but that's why carbon taxes are normally combined with a healthy redistributive element).

If you are ripping up the tax code and starting again, the very first thing that should be introduced is an effective, accurately priced, and properly enforced carbon tax. Doing so would render every other measure to fight climate change superfluous. The failure to take advantage of that ability implies that either the commission rejects any new tax out of hand, or embodies the worst of denialism.

4. If we assume that low taxes drive economic growth then we can see that lowering taxes will drive economic growth.

The commission uses the Centre for Economic and Business Research's dynamic model of the UK economy. We've addressed dynamic modelling before, particularly the often one-sided approach of assuming tax cuts will lead to more work and higher compliance while not making similar assumptions about spending, but the commissioners take the biscuit. They alter the model "based on [uncited] research into the impact of tax on the economy" such that it exaggerates the effect cutting tax will have on business investment, labour supply and net exports. Needless to say, if you build a model around the assumption that cutting tax drives business investment, it is not a massive achievement to then prove that cutting tax drives business investment. Tony Dolphin goes into more detail on this concern for Prospect.

This circular argument recurs many times throughout the report. Take page 76, for instance:

Peter and Mary are at school in very similar countries. At the moment, Peter’s country provides money to buy whatever teachers in state education request. The schools are well-equipped with the latest technology and buildings are refurbished frequently. In Mary’s country, there is stricter control over spending, the technology in schools is adequate, and buildings are only refurbished when they get shabby. The tax burden is therefore lower in Mary’s country, and the rate of economic growth is slightly higher.

Others may argue that the rate of growth will be higher in a country with a well-funded education system. But that doesn't get a look-in, even though, as Nick Pearce shows, the argument that low taxes lead to high growth is dubious.

5. Sexy, sexy low taxes

Political Scrapbook caught this with alarming speed, but Matt Ridley's section on the evolutionary psychology of low taxes is just bizarre:

Even in an age of working women, sexual continence and gender equality, the man with the most money still gets more sexual opportunities than the man with the least money. Ask them.

So no wonder we dislike inequality. No wonder we want tax to take that money off a Vanderbilt before he grabs all the best women. . .

[Support for taxation is] at least partly plain old sexual jealousy at the root.

Interestingly, there is no mention of the fact that, as well as being a Doctor of Zoology, Matt Ridley is also the Fifth Viscount Ridley, former chairman of Northern Rock. It doesn't take a foray into dodgy evolutionary psychology to work out why he might be in favor of lower taxes.

6. The lack of blue-sky thinking

The oddest thing about the report is how staid it is. Despite all the quirks throughout, its final conclusion – lower most taxes, scrap some – manages to be almost exactly what everyone expected when the commission was announced. Where is the genuinely innovative thinking? They missed the chance to call for a carbon tax, which would necessitate far less spending combating global warming; they missed the chance to call for legalisation and taxation of drugs; they could have taken on some of the right's darlings of spending, such as defence (5.7 per cent of expenditure) or crime and punishment (4.7 per cent) in order to justify their revenue cuts; and they decided against recommending taxation of wealth or land, focusing mainly on the fairness aspects.

It's this final point that really implies that this was a report written with a conclusion already in mind from the start. Which is depressing, because a real discussion of what a tax system drawn from scratch would be like is sorely overdue.

Jesus throws out the moneylenders. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

"We repealed, then forgot": the long shadow of Section 28 homophobia

Why are deeply conservative views about the "promotion" of homosexuality still being reiterated to Scottish school pupils? 

Grim stories of LGBTI children being bullied in school are all too common. But one which emerged over the weekend garnered particular attention - because of the echoes of the infamous Section 28, nearly two decades after it was scrapped.

A 16-year-old pupil of a West Lothian school, who does not wish to be named, told Pink News that staff asked him to remove his small rainbow pride badge because, though they had "no problem" with his sexuality, it was not appropriate to "promote it" in school. It's a blast from the past - the rules against "promoting" homosexuality were repealed in 2000 in Scotland, but the long legacy of Section 28 seems hard to shake off. 

The local authority responsible said in a statement that non-school related badges are not permitted on uniforms, and says it is "committed to equal rights for LGBT people". 

The small badge depicted a rainbow-striped heart, which the pupil said he had brought back from the Edinburgh Pride march the previous weekend. He reportedly "no longer feels comfortable going to school", and said homophobia from staff members felt "much more scar[y] than when I encountered the same from other pupils". 

At a time when four Scottish party leaders are gay, and the new Westminster parliament included a record number of LGBTQ MPs, the political world is making progress in promoting equality. But education, it seems, has not kept up. According to research from LGBT rights campaigners Stonewall, 40 per cent of LGBT pupils across the UK reported being taught nothing about LGBT issues at school. Among trans students, 44 per cent said school staff didn’t know what "trans" even means.

The need for teacher training and curriculum reform is at the top of campaigners' agendas. "We're disappointed but not surprised by this example," says Jordan Daly, the co-founder of Time for Inclusive Education [TIE]. His grassroots campaign focuses on making politicians and wider society aware of the reality LGBTI school students in Scotland face. "We're in schools on a monthly basis, so we know this is by no means an isolated incident." 

Studies have repeatedly shown a startling level of self-harm and mental illness reported by LGBTI school students. Trans students are particularly at risk. In 2015, Daly and colleagues began a tour of schools. Shocking stories included one in which a teacher singled out a trans pupils for ridicule in front of the class. More commonly, though, staff told them the same story: we just don't know what we're allowed to say about gay relationships. 

This is the point, according to Daly - retraining, or rather the lack of it. For some of those teachers trained during the 1980s and 1990s, when Section 28 prevented local authorities from "promoting homosexuality", confusion still reigns about what they can and cannot teach - or even mention in front of their pupils. 

The infamous clause was specific in its homophobia: the "acceptability of homosexuality as a pretended family relationship" could not be mentioned in schools. But it's been 17 years since the clause was repealed in Scotland - indeed, it was one of the very first acts of the new Scottish Parliament (the rest of the UK followed suit three years later). Why are we still hearing this archaic language? 

"We repealed, we clapped and cheered, and then we just forgot," Daly says. After the bitter campaign in Scotland, in which an alliance of churches led by millionaire businessman Brian Souter poured money into "Keeping the Clause", the government was pleased with its victory, which seemed to establish Holyrood as a progressive political space early on in the life of the parliament. But without updating the curriculum or retraining teaching staff, Daly argues, it left a "massive vacuum" of uncertainty. 

The Stonewall research suggests a similar confusion is likely across the UK. Daly doesn't believe the situation in Scotland is notably worse than in England, and disputes the oft-cited allegation that the issue is somehow worse in Scotland's denominational schools. Homophobia may be "wrapped up in the language of religious belief" in certain schools, he says, but it's "just as much of a problem elsewhere. The TIE campaign doesn't have different strategies for different schools." 

After initial disappointments - their thousands-strong petition to change the curriculum was thrown out by parliament in 2016 - the campaign has won the support of leaders such as Nicola Sturgeon and Kezia Dugdale, and recently, the backing of a majority of MSPs. The Scottish government has set up a working group, and promised a national strategy. 

But for Daly, who himself struggled at a young age with his sexuality and society's failure to accept it, the matter remains an urgent one.  At just 21, he can reel off countless painful stories of young LGBTI students - some of which end in tragedy. One of the saddest elements of the story from St Kentigern's is that the pupil claimed his school was the safest place he had to express his identity, because he was not out at home. Perhaps for a gay pupil in ten years time, that will be a guarantee. 

0800 7318496