Labour and the Tories are both avoiding the tax debate we need

The repetitive and needlessly venomous exchanges over the 50p rate distract from the long-term question of how we should pay for the services that we value in an era of austerity.

Ed Balls’s confirmation that Labour would restore the 50p top rate of income tax has gone down badly with the small number of people who would be eligible to pay. It isn’t very popular with conservative commentators either. The two sets no doubt intersect on the venn diagram of people who think austerity is a much better idea when it affects someone else.

None of this is very surprising. The economic and political arguments are pretty much the same as they were when George Osborne axed the rate – and it was all but inevitable that Labour would pledge to restore it. The attack on a “Tory tax cut for millionaires” probes a serious weakness in the Conservative brand, but its effectiveness would be diminished by a queasy caveat to the effect that “we hate it but we wouldn’t reverse it.” So reverse it Labour will, if they get the chance.

One thing Labour has failed to do in the days since the announcement was made is put any pressure on the Tories and Lib Dems to talk about their own tax rises this parliament – the VAT hike leaps out as a broken Conservative pre-election promise and a regressive measure – and the near certainty that there is more to come after 2015.

Osborne insists he can balance the books without raising any more taxes, simply by stripping yet more cash out of the welfare budget instead. (And he is confident that voters are sufficiently hostile to benefit spending to make cuts in that direction an attractive proposition.) But most economists and policy wonks who have looked at the fiscal projections and scanned the post-election landscape think any incoming government will be raising taxes and cutting spending.

So really the Balls announcement ought to be an opportunity to discuss with a bit of candour how money should be raised. If, as the critics insist, the 50p rate is ineffective and counter-productive, what kind of taxes are legitimate and just?

None but the flattest and lowest possible, say the libertarians. But let’s suppose for the sake of argument that an incoming government isn’t rolling in surprisingly luxuriant revenues – that growth disappoints – yet still ministers want to provide universal healthcare, education, a police force, some military capability, investment in infrastructure and a basic guarantee that elderly people will not be abandoned to penury and starvation.

Those, after all, will be Labour and Tory manifesto commitments and they will have to be funded. Even if you accept the view that the optimum direction is always towards lower taxes, there is still a debate to be had about widening the tax base and winning consent for government to impose levies and spend on our collective behalf from time to time.

In my column in the magazine last week, I mentioned the intriguing example of the special “business rate supplement” that helps meet the costs of Crossrail. Those who set it up say the companies that stand to benefit from the new train service were more than happy to subsidise its construction. “A rare example of taxpayers asking to pay more taxes,” was how one architect of the scheme described it to me. Labour’s policy review team are looking closely at this kind of approach – allowing local authorities more fiscal freedom if the focus is on boosting local services and infrastructure.

In a very different corner of the policy field, Danny Finkelstein, Times columnist, Conservative peer, and casual advisor to the Chancellor, recently floated the idea of a dedicated NHS tax. The idea is that British voters will only be persuaded of the case for drastic reform of the health service when they are confronted with the reality of how much the current funding model costs them and how inexorably that burden will rise. (The Times article is behind a paywall, so here’s a free discussion of the same issue from Nick Pearce’s IPPR blog.)

The appearance of this notion under Lord Finkelstein’s byline all but guarantees that it will be under some level of consideration in the Treasury. What this and Labour’s local infrastructure thinking have in common is a recognition that traditional models of consent for tax rises have broken down.

Whitehall has always hated hypothecation – the pegging of specific revenue streams to particular services. But in a climate where politicians and officials are simply not trusted with public money, some new devices will be needed to reassure people, whether as private households or businesses, that it is worthwhile handing a portion of their earnings over to state agencies so they can effect good works.

The repetitive and needlessly venomous exchanges over the 50p rate have shown that British politicians like arguments about taxes that reinforce existing prejudices about their opponents – Labour as neo-Bolshevik confiscators of wealth; Tories as self-serving plutocrats defending their entrenched privileges. There are all sorts of questions to be asked about the kind of taxation that supports growth and enterprise, adequately and sustainably funds public services, is not too onerous and conforms to voters’ natural sense of fairness. Sadly, that isn’t the debate we are going to have in the run-up to the next general election. 

Ed Balls and George Osborne attend the State Opening of Parliament on May 8, 2013. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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Inside the Momentum rally: meet the Jeremy Corbyn supporters challenging Labour’s rebel MPs

The Labour leader's followers had been waiting a long time for him to come along. 

Ed Miliband’s leadership of the Labour Party is at stake. As the news filters through the party’s branches, hundreds of thousands sign petitions in his support. But this is no online craze. By evening, thousands of diehard fans have gathered in Parliament Square, where they shout “Ed, Ed, Ed,” to the beat of a drum. Many swear Ed was the only thing keeping them in the Labour Party. They can’t imagine supporting it without him.

Am I stretching your credibility? Even a Milifan would be hard pressed to imagine such a scene. But this is precisely Labour’s problem. Only Jeremy Corbyn can command this kind of passion.

As the Shadow Cabinet MPs began to resign on Sunday, Momentum activists sprang into action. The rally outside Parliament on Monday evening  was organised with only 24 hours notice. The organisers said 4,000 were there. It certainly felt to me like a thousand or more were crammed into the square, and it took a long time to push through to the front of the crowd. 

In contrast to the whispered corridor conversations happening across the road, the Corbyn fans were noisy. Not only did they chant Jeremy’s name, they booed any mention of the Parliamentary Labour Party and waved signs denouncing rebel MPs as “scabs”. Other posters had a whiff of the cult about them. One declared: “We love Jeremy Corbyn”. Many had the t-shirt. 

“Jeremy Corbyn brought me back into the Labour Party,” Mike Jackson, one of the t-shirt wearers, told me. He had voted Remain, but he didn’t care that the majority of the Shadow Cabinet had resigned. “He’s got a new Shadow Cabinet. It’s more diverse, there are working class voices at last, there are women, the BME community. It is exactly how it should be.” Another man simply told me: “I am here for Corbyn.”

The crowd was diverse, but in the way a university campus is diverse, not a London street or school playground. They shouted angry slogans, then moved aside obligingly for me to pass through. Jack, a young actor who did not want to give his full name, told me: “I used to vote Green. I am joining Labour because of Jeremy Corbyn. I like the guy. He listens. I have seen friends frustrated with him, but I really think he can do it.”

Syada Fatima Dastagir, a student, has supported Labour for years - “Old Labour”. She thought Corbyn would survive the coup: “I voted Green and Plaid Cymru, because I didn’t think Labour supported its roots. This has brought Labour back to its roots.”

This belief that Jezza will overcome was present everywhere in the crowd. When I asked Momentum organiser Sophie Nazemi if she thought Corbyn would go, she replied: “He won’t.”

She continued: “It is important that we demonstrate that if there is a leadership election, Jeremy will win again. It will be three months of distraction we don’t need when there is likely to be an election this year.”

Instead of turning on Corbyn, Labour should be focused on campaigning for better local housing stock and investment in post-industrial towns, she said. 

Whatever happens, she said Momentum would continue to build its grassroots organisation: “This is more than just about Jeremy, whilst Jeremy is our leader.”

As I moved off through the chanting crowds, I remembered bumping into Corbyn at an anti-austerity march just a year ago. Although he had thrown his hat into the ring for Labour leadership, he was on his own, anonymous to most of the passers by. In the year that has passed, he has become the figurehead of an unlikely cult.

Nevertheless, it was also clear from the people I spoke to that they have been waiting ages for him to come along. In other words, they chose their messiah. The PLP may try to bury him. But if these activists have their way, he’ll rise again.