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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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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