Labour should raise income tax

During its seven years in office, new Labour has transformed the terms of public debate so that poverty and inequality are no longer unmentionables. It has also brought to a near-complete halt the Thatcher revolution, which saw dramatic increases in poverty and inequality throughout the 1980s and early 1990s. Is that enough, in the eyes of the left, to redeem a government that looks un-Labour on, for example, trade unions and public ownership, illiberal on civil liberties and crime, and thoroughly bellicose in foreign affairs?

An audit of social justice in Britain, from the Institute for Public Policy Research, suggests not. Since 1997, the richest 1 per cent of the population have continued to get richer, with their share of national income rising to 13 per cent. The distribution of wealth (shares, houses and so on) has also become more unequal, with the wealthiest 10 per cent owning 54 per cent of the nation's wealth in 2000. Though Britain no longer has the highest child poverty rate in Europe, nearly one child in four still lives in poverty, against only one in eight in 1979. In Denmark, it is only one in 20. Persistent poverty - citizens who have been poor for at least three of the past four years - is above the EU average.

Moreover, some public services appear not to make an adequate contribution to the achievement of a more equal society. Primary schools with high intakes of deprived children made less progress between 1999 and 2002 than those with fewer such children. Children from the highest social classes are still twice as likely to get top GCSE grades in five or more subjects as those from the lower social classes. Though children from poorer homes have an improved chance of getting to university, those from affluent backgrounds have seen their chances improve even more. The tax and benefit system also seems to have less impact than it should: despite good Treasury intentions, it doesn't redistribute wealth even to the limited extent it did when Labour came to power, perhaps because of the growth of unclaimed means-tested benefits.

Some of these figures, ministers may reasonably argue, are unfair. The wealth figures date from the height of the stock market boom. The subsequent bust will have deflated rich people's assets; and a housing market bust must surely deflate them even further before long. The education service cannot be expected to deliver dramatic changes overnight: Labour's growing investment in the vital early years of children's lives may take a decade or more to produce measurable results.

But as the IPPR report points out, the government "appears to lack a vision that it feels comfortable to articulate publicly and pursue consistently". Its education policies, for example, are designed to deliver the choice and diversity supposedly desired by the middle classes, not the more equal life chances needed by the working classes. It remains stubbornly insistent that the 40 per cent top rate of income tax - slightly lower even than in New York, and much lower than in Austria, Belgium and the Netherlands - should remain unchanged. Whatever the arguments about its revenue-raising and equalising effects, a rise is now needed as a symbol of Labour's commitment to social justice and progressive taxation. It cannot be right that the bottom fifth of workers pay a higher proportion of their income in tax than the top fifth.

Poverty and inequality matter. Their reduction would do more to raise children's test scores, improve national health and cut crime than any performance targets or five-year plans. The IPPR is right to call, in the measured tones of a Blairite think-tank, for a third-term Labour government that sets its sights on "lasting social and economic change".

Choose your conspiracy

In the murky worlds of terrorism, intelligence and homeland security, it is hard for the average citizen to make sense of what is going on. Numerous people have an interest in talking up terrorist threats: police and intelligence services that want bigger budgets; newspapers that want a good story; al-Qaeda leaders who want to sow fear and confusion; ministers who want to show their vigilance; opposing politicians who want to prove that, on the contrary, they are negligent and half-asleep. Over the past three years, we have read, for example, of discoveries of deadly poison and of plots to blow up football grounds. Only later do we learn (usually on an inside page) that the alleged poisons were, er, not poisonous and that the alleged plotters were, er, football fans.

Now, we learn, the US press was briefed by "a senior intelligence official" that the administration had received from Pakistan "new information . . . chilling in its scope". A day later, most of the information turns out to be more than three years old. Everyone notes that President George W Bush, facing re-election, is rated 10 points ahead of his rival in opinion polls when it comes to handling terrorist threats.

Many on the left will be inclined to believe a ruling-class conspiracy theory, in which our masters use fear to keep us in our places, as an excuse to bang up dissidents and as a device to win votes. But another kind of conspiracy is plausible, as Jamie Campbell argues on page 16. Perhaps the UK government gives an easy ride to terrorists in the belief that, if they see this country as home, they will take their attacks elsewhere. True or not, this is widely believed on the Continent.

What is disturbing is that people will now believe almost anything of their leaders: those who subscribe to one or other theory are likely far to exceed those who subscribe to neither. That is one of the effects of the WMDs that never were. Politicians can huff and puff all they like, but for the foreseeable future, people will ascribe the worst of motives to them.

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