If the likes of Philip Green's family desire the rights that come with UK citizenship, they should be required to make fair tax contributions. Photo: Getty
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Leader: Labour should make itself the party of tax cuts and bold tax reform

If the party was radical rather than obsessed with process and presentation, it would be setting out proposals to overhaul our tax system.

Our tax system is just about the most unfair and inefficient imaginable. The Institute for Fiscal Studies has said that the UK has “an opaque jumble of different effective rates [of tax] as a result of tapered allowances and a separate National Insurance system”. The system urgently needs reform but which politician has the stamina and originality of thought to achieve it?

However, some change might be coming. It has been reported that George Osborne is considering merging National Insurance (NI) and income tax into a single tax. Such a move would, it has been suggested, have advantages for a Conservative chancellor. It would further weaken the contributory principle that was the foundation of the welfare state but that has long since been eroded; it would also raise the headline rate of taxation, and thus increase a desire for tax cuts because people would have a clearer sense of how much of their income they were paying to the state.

Yet, in spite of these objections, we would support the merging of NI and income tax in the interests of greater transparency but also because we believe low- and middle-income earners in Britain already pay too much tax, especially when fuel duty, VAT, council tax and stagnant real wages are taken into account. Ed Miliband complains about a “cost-of-living crisis”. Perhaps, in response, he should consider cutting the average earner’s tax burden.

Our income-tax system is opaque. Governments delight in obfuscation and complication. At present, the marginal income-tax rate on a single earner on the median salary of £26,500 is officially 20 per cent; in fact, when you take NI into account, it is 32 per cent. The coalition government likes to boast that, by raising the personal tax allowance to £10,000, it has taken low earners out of income tax altogether. It has done nothing of the kind.

If the Labour Party was radical rather than obsessed with process and presentation, and if it wanted to win a popular mandate rather than merely limp over the line in coalition with whatever might be left of the Liberal Democrats at Westminster after the general election in 2015, it would be setting out proposals to overhaul our tax system.

Indeed, it would aspire to become a party of tax cuts for low- and middle-income earners and seek to switch some of the burden of taxation from income and consumption to static assets such as property and land, as well as environmental bads. It would reform inheritance tax so that the rich become less able to avoid it. It would introduce land value taxes, at least for business and agricultural land but also potentially for property. The rebanding of council tax, which is based on valuations more than 20 years old, would also be an essential part of any wide-ranging programme of reform.

Such policies would ensure that those who have benefited most from the house-price inflation of the past decade or so were making a fair contribution to the national burden: property, unlike capital, cannot be hidden in offshore accounts.

Creating the political space for such a course of action, however, would require the Labour Party to make a more persuasive case for progressive taxation. For too long, paying your fair share in taxes has been framed as an unfortunate burden, rather than part of what it means to live as a responsible citizen in a free and open society.

A first, bold step towards achieving a more equitable and transparent tax system would be to change the rules concerning those ultra-rich British citizens who reside abroad for tax reasons. If those such as the family of Philip Green – the billionaire chief executive of the Arcadia retail group (and adviser on public spending to the Conservative Party) whose wife is resident in Monaco – desire the rights and security that come with British citizenship, they should be required to make a fair contribution in taxation to the British state.

If an American wishes to retain US citizenship, he is liable for federal taxes no matter where he lives in the world. It is a convention that dates back to 1861 and the American civil war. Surely it is time for all those Britons who hide their money tax-free in overseas accounts or in tax havens to pay up, as Americans are obliged to do – or renounce the right to be British. Here is one policy that, if it were adopted by the Labour Party, would have genuine popular appeal. What’s there not to like about it? 

This article first appeared in the 02 July 2014 issue of the New Statesman, After God Again

Photo: Getty Images
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What do Labour's lost voters make of the Labour leadership candidates?

What does Newsnight's focus group make of the Labour leadership candidates?

Tonight on Newsnight, an IpsosMori focus group of former Labour voters talks about the four Labour leadership candidates. What did they make of the four candidates?

On Andy Burnham:

“He’s the old guard, with Yvette Cooper”

“It’s the same message they were trying to portray right up to the election”​

“I thought that he acknowledged the fact that they didn’t say sorry during the time of the election, and how can you expect people to vote for you when you’re not actually acknowledging that you were part of the problem”​

“Strongish leader, and at least he’s acknowledging and saying let’s move on from here as opposed to wishy washy”

“I was surprised how long he’d been in politics if he was talking about Tony Blair years – he doesn’t look old enough”

On Jeremy Corbyn:

"“He’s the older guy with the grey hair who’s got all the policies straight out of the sixties and is a bit of a hippy as well is what he comes across as” 

“I agree with most of what he said, I must admit, but I don’t think as a country we can afford his principles”

“He was just going to be the opposite of Conservatives, but there might be policies on the Conservative side that, y’know, might be good policies”

“I’ve heard in the paper he’s the favourite to win the Labour leadership. Well, if that was him, then I won’t be voting for Labour, put it that way”

“I think he’s a very good politician but he’s unelectable as a Prime Minister”

On Yvette Cooper

“She sounds quite positive doesn’t she – for families and their everyday issues”

“Bedroom tax, working tax credits, mainly mum things as well”

“We had Margaret Thatcher obviously years ago, and then I’ve always thought about it being a man, I wanted a man, thinking they were stronger…  she was very strong and decisive as well”

“She was very clear – more so than the other guy [Burnham]”

“I think she’s trying to play down her economics background to sort of distance herself from her husband… I think she’s dumbing herself down”

On Liz Kendall

“None of it came from the heart”

“She just sounds like someone’s told her to say something, it’s not coming from the heart, she needs passion”

“Rather than saying what she’s going to do, she’s attacking”

“She reminded me of a headteacher when she was standing there, and she was quite boring. She just didn’t seem to have any sort of personality, and you can’t imagine her being a leader of a party”

“With Liz Kendall and Andy Burnham there’s a lot of rhetoric but there doesn’t seem to be a lot of direction behind what they’re saying. There seems to be a lot of words but no action.”

And, finally, a piece of advice for all four candidates, should they win the leadership election:

“Get down on your hands and knees and start praying”

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.