Leader: Far tougher choices are needed on tax and spend

Neither the tax rises proposed by Labour, nor the benefits cuts proposed by the Tories would make a significant dent in the deficit.

The 2010 general election was defined by a conspiracy of silence between the main parties. For fear of the electoral consequences, neither Labour nor the Conservatives spelled out to voters what austerity would entail in practice. While vowing to halve the deficit, Gordon Brown never acknowledged the scale of spending cuts that would be needed to meet this pledge. The Tories, who promised to eliminate the structural deficit in a single parliament, were no better. The weekend before the election, David Cameron declared that any future cabinet minister who proposed “front-line reductions” in services would be “sent straight back to their department to go away and think again”. During the campaign, he said that his party had “absolutely no plans” to raise VAT, that he “wouldn’t means-test” child benefit, that Sure Start centres would not be closed and that the Education Maintenance Allowance would remain in place. Each one of these promises was broken before the year was out.

This year has begun with both the Tories and Labour declaring that they are prepared to make the “tough choices” required to reduce the deficit – which the government forecasts will be £111bn this year – in the next parliament. George Osborne has promised to implement £25bn of further spending cuts, including £12bn from welfare, in the two years after the next general election. Ed Balls has announced that Labour will seek to achieve a current budget surplus by the end of the next parliament and will reintroduce the 50p income-tax rate to help with this task. Both men wish to be seen as fiscal disciplinarians, taking difficult but necessary decisions in the national interest. Yet neither can credibly claim this mantle.

There is little that is brave about cutting benefits for the poor or raising taxes on the rich, policies that have the overwhelming support of the public. Voters, unsurprisingly, are most in favour of austerity when it does not affect them. Just 1.5 per cent of taxpayers have earnings above the £150,000 threshold at which the 50p tax rate would be introduced and a similarly small proportion of households is affected by measures such as the benefit cap. For this reason, none of the policies recently announced by Mr Balls and Mr Osborne would make a significant dent in the deficit. Rather, their logic is almost entirely political. The Tories are seeking to frame Labour as the party of welfare, Labour to frame the Tories as the party of the wealthy. One can hardly blame politicians for playing politics but the danger is that this ideological skirmish denies the country the open debate it needs about its fiscal choices.

Despite the return of consistent growth, the scale of austerity required after 2015, owing to the persistence of the structural deficit (which stands at 3.6 per cent of GDP), has not lessened. The Institute for Fiscal Studies has estimated that £12bn of further tax rises or welfare cuts will be needed merely to maintain departmental spending cuts at their current level. While Mr Osborne has declared his willingness to make welfare reductions of this size, he has notably refused to specify any beyond the abolition of housing benefit for the under-25s, a measure that would raise at most £1.2bn, and likely less after exemptions for the disabled and other vulnerable groups. Beyond the tax rises announced by Labour, most of which are to fund new spending programmes, Mr Balls has offered to remove winter fuel payments from the wealthiest 5 per cent of pensioners, a cut that would save just £100m.

For the sake of democracy as well as good government, we need a far wider debate about the services the state should fund and the taxes it should levy to pay for them. Both parties should consider significantly deeper cuts to a defence budget that remains the fourth largest in the world. At a time when property values are rising far faster than incomes, they should also look to increase the taxation of high-value estates, including steeper rates of stamp duty and the imposition of capital gains tax on first properties. Other imaginative options include the introduction of a land value tax and a higher rate of VAT on luxury items. But given that it seems the limits of departmental cuts will soon be reached, the parties ultimately may need to discuss openly the possibility of raising the only taxes that reap reliably large revenues: the basic rate of income tax, National Insurance and VAT. That would be a properly “tough choice”.
 

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

This article first appeared in the 29 January 2014 issue of the New Statesman, The seven per cent problem

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Who "speaks for England" - and for that matter, what is "England"?

The Hollywood producer Sam Gold­wyn once demanded, “Let’s have some new clichés.” The Daily Mail, however, is always happiest with the old ones.

The Hollywood producer Sam Gold­wyn once demanded, “Let’s have some new clichés.” The Daily Mail, however, is always happiest with the old ones. It trotted out Leo Amery’s House of Commons call from September 1939, “Speak for England”, for the headline on a deranged leader that filled a picture-free front page on David Cameron’s “deal” to keep Britain in the EU.

Demands that somebody or other speak for England have followed thick and fast ever since Amery addressed his call to Labour’s Arthur Greenwood when Neville Chamberlain was still dithering over war with Hitler. Tory MPs shouted, “Speak for England!” when Michael Foot, the then Labour leader, rose in the Commons in 1982 after Argentina’s invasion of the Falklands. The Mail columnist Andrew Alexander called on Clare Short to “speak for England” over the Iraq War in 2003. “Can [Ed] Miliband speak for England?” Anthony Barnett asked in this very magazine in 2013. (Judging by the 2015 election result, one would say not.) “I speak for England,” claimed John Redwood last year. “Labour must speak for England,” countered Frank Field soon afterwards.

The Mail’s invocation of Amery was misconceived for two reasons. First, Amery wanted us to wage war in Europe in support of Hitler’s victims in Poland and elsewhere and in alliance with France, not to isolate ourselves from the continent. Second, “speak for England” in recent years has been used in support of “English votes for English laws”, following proposals for further devolution to Scotland. As the Mail was among the most adamant in demanding that Scots keep their noses out of English affairs, it’s a bit rich of it now to state “of course, by ‘England’. . . we mean the whole of the United Kingdom”.

 

EU immemorial

The Mail is also wrong in arguing that “we are at a crossroads in our island history”. The suggestion that the choice is between “submitting to a statist, unelected bureaucracy in Brussels” and reclaiming our ancient island liberties is pure nonsense. In the long run, withdrawing from the EU will make little difference. Levels of immigration will be determined, as they always have been, mainly by employers’ demands for labour and the difficulties of policing the borders of a country that has become a leading international transport hub. The terms on which we continue to trade with EU members will be determined largely by unelected bureaucrats in Brussels after discussions with unelected bureaucrats in London.

The British are bored by the EU and the interminable Westminster arguments. If voters support Brexit, it will probably be because they then expect to hear no more on the subject. They will be sadly mistaken. The withdrawal negotiations will take years, with the Farages and Duncan Smiths still foaming at the mouth, Cameron still claiming phoney victories and Angela Merkel, François Hollande and the dreaded Jean-Claude Juncker playing a bigger part in our lives than ever.

 

An empty cabinet

Meanwhile, one wonders what has become of Jeremy Corbyn or, indeed, the rest of the shadow cabinet. The Mail’s “speak for England” leader excoriated him for not mentioning “the Number One subject of the hour” at PM’s Questions but instead asking about a shortage of therapeutic radiographers in the NHS. In fact, the NHS’s problems – almost wholly caused by Tory “reforms” and spending cuts – would concern more people than does our future in the EU. But radiographers are hardly headline news, and Corbyn and his team seem unable to get anything into the nation’s “any other business”, never mind to the top of its agenda.

Public services deteriorate by the day, George Osborne’s fiscal plans look increasingly awry, and attempts to wring tax receipts out of big corporations appear hopelessly inadequate. Yet since Christmas I have hardly seen a shadow minister featured in the papers or spotted one on TV, except to say something about Trident, another subject that most voters don’t care about.

 

Incurable prose

According to the Guardian’s admirable but (let’s be honest) rather tedious series celeb­rating the NHS, a US health-care firm has advised investors that “privatisation of the UK marketplace . . . should create organic and de novo opportunities”. I have no idea what this means, though it sounds ominous. But I am quite certain I don’t want my local hospital or GP practice run by people who write prose like that.

 

Fashionable Foxes

My home-town football team, Leicester City, are normally so unfashionable that they’re not even fashionable in Leicester, where the smart set mostly watch the rugby union team Leicester Tigers. Even when they installed themselves near the top of the Premier League before Christmas, newspapers scarcely noticed them.

Now, with the Foxes five points clear at the top and 7-4 favourites for their first title, that mistake is corrected and the sports pages are running out of superlatives, a comparison with Barcelona being the most improbable. Even I, not a football enthusiast, have watched a few matches. If more football were played as Leicester play it – moving at speed towards their opponents’ goal rather than aimlessly weaving pretty patterns in midfield – I would watch the game more.

Nevertheless, I recall 1963, when Leicester headed the old First Division with five games to play. They picked up only one more point and finished fourth, nine points adrift of the league winners, Everton.

 

Gum unstuck

No, I don’t chew toothpaste to stop me smoking, as the last week’s column strangely suggested. I chew Nicorette gum, a reference written at some stage but somehow lost (probably by me) before it reached print.

Editor: The chief sub apologises for this mistake, which was hers

Peter Wilby was editor of the Independent on Sunday from 1995 to 1996 and of the New Statesman from 1998 to 2005. He writes the weekly First Thoughts column for the NS.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle