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

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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