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

Photo: Getty
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The campaign to keep Britain in Europe must be based on hope, not fear

Together we can show the world a generous, outward-facing Britain we can all be proud of.

Today the Liberal Democrats launched our national campaign to keep Britain in Europe. With the polls showing the outcome of this referendum is on a knife-edge, our party is determined to play a decisive role in this once in a generation fight. This will not be an easy campaign. But it is one we will relish as the UK's most outward-looking and internationalist party. Together in Europe the UK has delivered peace, created the world’s largest free trade area and given the British people the opportunity to live, work and travel freely across the continent. Now is the time to build on these achievements, not throw them all away.

Already we are hearing fear-mongering from both sides in this heated debate. On the one hand, Ukip and the feuding Leave campaigns have shamelessly seized on the events in Cologne at New Year to claim that British women will be at risk if the UK stays in Europe. On the other, David Cameron claims that the refugees he derides as a "bunch of migrants" in Calais will all descend on the other side of the Channel the minute Britain leaves the EU. The British public deserve better than this. Rather than constant mud-slinging and politicising of the world's biggest humanitarian crisis since the Second World War, we need a frank and honest debate about what is really at stake. Most importantly this should be a positive campaign, one that is fought on hope and not on fear. As we have a seen in Scotland, a referendum won through scare tactics alone risks winning the battle but losing the war.

The voice of business and civil society, from scientists and the police to environmental charities, have a crucial role to play in explaining how being in the EU benefits the British economy and enhances people's everyday lives. All those who believe in Britain's EU membership must not be afraid to speak out and make the positive case why being in Europe makes us more prosperous, stable and secure. Because at its heart this debate is not just about facts and figures, it is about what kind of country we want to be.

The Leave campaigns cannot agree what they believe in. Some want the UK to be an offshore, deregulated tax haven, others advocate a protectionist, mean-hearted country that shuts it doors to the world. As with so many populist movements, from Putin to Trump, they are defined not by what they are for but what they are against. Their failure to come up with a credible vision for our country's future is not patriotic, it is irresponsible.

This leaves the field open to put forward a united vision of Britain's place in Europe and the world. Liberal Democrats are clear what we believe in: an open, inclusive and tolerant nation that stands tall in the world and doesn't hide from it. We are not uncritical of the EU's institutions. Indeed as Liberals, we fiercely believe that power must be devolved to the lowest possible level, empowering communities and individuals wherever possible to make decisions for themselves. But we recognise that staying in Europe is the best way to find the solutions to the problems that don't stop at borders, rather than leaving them to our children and grandchildren. We believe Britain must put itself at the heart of our continent's future and shape a more effective and more accountable Europe, focused on responding to major global challenges we face.

Together in Europe we can build a strong and prosperous future, from pioneering research into life-saving new medicines to tackling climate change and fighting international crime. Together we can provide hope for the desperate and spread the peace we now take for granted to the rest of the world. And together we can show the world a generous, outward-facing Britain we can all be proud of. So if you agree then join the Liberal Democrat campaign today, to remain in together, and to stand up for the type of Britain you think we should be.