Politics
Desperate times need desperate measures: why Gordon Brown must cut tax for the poor
Published 13 November 2008
Few of us who lived through the recession of the late 1970s and early 1980s can forget the misery caused by high unemployment as the Thatcher counter-revolution destroyed traditional working-class communities, especially in Britain's industrial northern cities. In retrospect, it feels as if an entire generation of working families were sacrificed on the altar of the free-market experiment as the Tories broke violently from the quasi-socialist consensus politics of the postwar decades. From when the Conservative were re-elected in May 1979 to the winter of 1988, 94 per cent of all jobs lost in Britain were north of a metaphoric line running from the Wash to the British Channel, according to the Census of Employment.
Margaret Thatcher, and the doctrine that became known as Thatcherism, was especially despised in the manufacturing heartlands of England and Scotland - in Manchester, Newcastle and Glasgow, where the Labour Party still remained strong throughout the Eighties. Elsewhere around the country it had been in embattled retreat, first with the rancorous split of 1981 and then, under the leadership of Neil Kinnock, seeking a more pragmatic accommodation of the Thatcherite realities.
One consequence of Thatcher extremism is that the once grandly named Conservative and Unionist Party has now only one MP in Scotland, compared with 22 when Mrs Thatcher was elected in 1979. In Liverpool, where some 20 per cent of the workforce was unemployed through much of the Eighties, the Conservative Party remains, even today, largely unelectable on Merseyside, where it has no MPs or city councillors. The people of Glasgow and Liverpool will never forget how it felt to be out of work, without any prospects of finding a job, without hope and dignity.
Now, once again, unemployment is rising rapidly and this week reached its highest level since 1997. Very soon, there will be more than 2 million people unemployed in Britain, as well as more than 2.5 million on invalidity benefit. These are desperate times and Gordon Brown, in hurried response, is being forced into desperate measures - such as contemplating unfunded tax cuts to stimulate demand in the economy.
We invariably associate tax cuts with the Conservative Party. They were used by the Tories under Thatcher to "reward enterprise", to "encourage risk and talent": lower taxes and cuts in public spending were the engines of a market economy. But they can also be progressive, as Will Hutton writes of Barack Obama's priorities on page 18, when they are used to benefit the low paid, the very people who are most affected by recession. The poor are always with us and will always need to spend what little money they have. Mr Brown knows this and knows, too, that reducing the tax burden of the poorest, when interest rates are at their lowest since 1955, will stimulate demand. It could also have electoral advantages, especially if he decides to call an election in the spring.
There will, of course, be a reckoning in the midterm, with either the overall tax burden having to be raised or public spending cut. But for Labour the risks are not great: either they will still be in power after the next election or the Tories will be burdened with having to raise taxes as a consequence of Labour's emergency counter-recessionary measures.
As Mr Brown prepares for the G20 economic summit in Washington, he is in control of events for the first time since last autumn. That confidence comes not only from the banking crisis, throughout which he has shown decisive leadership, but also from the successful cabinet reshuffle, which brought Peter Mandelson back to the centre of power. Mr Mandelson has become, in effect, Mr Brown's chief adviser, his "number two", having replaced Ed Balls in that role. That relationship between the Prime Minister and his close friend has not properly recovered from a bitter argument between the two men over last year's election that never was.
The by-election victory in Glenrothes has further emboldened the Prime Minister. With the Tories proving resolutely unimpressive during this crisis, Mr Brown has to show, now, that he is bold enough to make the case for a fair and progressive taxation system. If he can get that crucial balance right - and continue to show a broad-minded and imaginative approach to the way he governs - he may be remembered as a true one-nation Prime Minister. And, contrary to conventional wisdom, he may yet win.
Post this article to
We want to encourage people to comment on our content and to exchange views with other readers and hope this will be done on a courteous basis. However, if you encounter posts which are offensive please let us know by emailing comments@newstatesman.co.uk and we will take swift action where necessary.
