What does Labour offer on tax now? Photo: Getty Images
Show Hide image

Don't be fooled. The country needs and wants a honest debate about tax

Labour's chastening defeat has led some to claim the party is abandoning its commitments on tax. But that's a myth.

Has Labour, as Janan Ganesh claimed recently, ‘quietly given up on that which used to define it’? The article – and the wider argument – was based on wrongheaded assumptions about Labour – and taxation more generally.

By arguing that Labour’s focus on taxing ‘The Rich’ was insufficient in either generating enough revenue or honouring the principle of solidarity’, he suggests that Labour has turned away from its – apparently - high tax roots. According to Ganesh, ‘voters do not wish to pay more tax and do not assume that the tax they already pay is a proxy measure of their goodness as people’.

But Ganesh is wrong: the dividing lines on tax and redistribution between the parties remain clear, and it is the Labour party that has stayed on the right side of the debate.

Firstly, the pervasive narrative of Labour as the party of high taxes must be better understood for what it is: mythology. The article refers to Labour’s offer in 1992 as a classic example of self-righteousness over higher taxes, a pervasive political myth on the right. Yet, its manifesto was full of sound and perceptive tax proposals: who knew that the Conservatives’ celebrated personal allowance extensions had their roots in Labour’s 1992 manifesto which pledged to ‘take 740,000 taxpayers out of taxation altogether’? Furthermore, it promised to leave the basic and higher rates of income tax unchanged, and to abolish the iniquitous ceiling on National Insurance, which continues to this day (where earnings under £815 a week pay 12% in NICs while earnings over £815 pay only 2% in NICs). Mythology is of course persuasive and important: but these tax policies expose the hollow scaremongering that inaccurately overshadows Labour’s economic credibility.

Secondly, Ganesh interprets the taxing of bank bonuses, increasing the top rate of income tax, and the introduction of a ‘mansion’ tax as ‘petty politics’, echoing accusations from the Telegraph of Labour’s politics of ‘pure class envy’: yet, this analysis demonstrates how far the political right underestimates the significance (and popularity) of taxing wealth.

Labour’s election tax proposals were designed to promote exactly the ‘universalism and solidarity’ that Ganesh suggests it has abandoned. Taxing wealth properly addresses the UK’s chronic inequality, and Labour’s proposals attempted to grapple with the question of fairness in the system (the moral question of how we tax) alongside the dominant concern of revenue raising (the economic question of how much we tax). While Conservatives might dream of becoming the ‘workers’ party’ in ‘taking people out of tax’ through personal allowance extensions, the policy has further entrenched inequality in the system, with the reform disproportionately benefitting the wealthiest. Meanwhile, the Equality Trust has shown that while the wealthiest 10% of taxpayers pay 35p in every pound of their income in all forms of tax, for the poorest 10%, this figure is 43p. As such, the inherent, institutionalised injustices of the tax system require a radical overhaul with a focus on entrenched wealth: this, via examples such as a tax on property wealth, was exactly Labour’s offer last month.

Ganesh is partly right when he says that ‘by international standards, Britain is not overtaxed’, as, unlike low and middle wages, entrenched and unearned wealth remains chronically under-taxed. And this is important not just for the warped caricature of a party that taxes for tax’s sake: it has huge economic consequences too. Indeed, the OECD has demonstrated that societal inequality erodes economic productivity, knocking an estimated 9% off cumulative growth in the UK between 1990 and 2010. Reforming the tax system in favour of fairness and distribution is in the interests of all those professing commitment to a strong economy. Indeed, Labour’s ‘mansion tax’ seems less far-fetched when compared to the International Monetary Fund’s promotion of a one-off wealth tax of 10% in developed countries to wipe out public debt. And while the politics of revenue raising matters here (with Labour’s mansion tax plans estimated to raise £1.2bn), the politics of fairness and distribution are morally crucial too.

Finally, Ganesh’s implicit assumption of the public’s disengagement with taxation is unfounded. Blindly presenting all tax as intrinsically ‘bad’ is to misunderstand people’s continued connection to it. Most people are not inherently against taxes if they are collected fairly, used transparently, and if all contribute a fair share - hence the public’s outrage at tax avoidance. And while the tax burdens on low to middle income earners clearly need to be lessened, parties of all stripes must rid themselves of the idea that talking tax is toxic.

Public attitudes research shows distinct support for taxes when linked to high quality public service, with significant support for the introduction of a high value property tax and even increases in personal taxation to fund the NHS. Furthermore, forthcoming Fabian Society research on public attitudes to taxation indicates the desire for a more transparent tax system, with greater information and honest debate about the tax people pay. Indeed, it was precisely this attitude that secured public confidence when Gordon Brown introduced the ‘penny increase’ in National Insurance Contributions to provide funding for the NHS (following discussion in the Fabian Society’s Commission on Taxation and Citizenship in 2000). All parties must do more to engage with this sort of open discussion on tax.

Mythologies surrounding Labour’s history and public attitudes continue to distance the party (and indeed all parties) from the brighter reality on tax, that the public can handle (and indeed desperately want) honest, open discussion on the subject. As the Institute for Fiscal Studies identified during the election, this sort of debate is chronically missing, whether it’s about how we tax, or how much we tax. And it would be wrong to let such scaremongering frighten progressive politicians from engaging with these debates over the next five years, debates which we all deserve to be part of.

Daisy Srblin is a Research Fellow at the Fabian Society and is working on a forthcoming publication on public attitudes to taxation, for publication in Summer 2015 as part of the Future of Tax project.




Show Hide image

For the first time in my life I have a sworn enemy – and I don’t even know her name

The cyclist, though, was enraged. “THAT’S CLEVER, ISN’T IT?” she yelled. “WALKING IN THE ROAD!”

Last month, I made an enemy. I do not say this lightly, and I certainly don’t say it with pride, as a more aggressive male might. Throughout my life I have avoided confrontation with a scrupulousness that an unkind observer would call out-and-out cowardice. A waiter could bring the wrong order, cold and crawling with maggots, and in response to “How is everything?” I’d still manage a grin and a “lovely, thanks”.

On the Underground, I’m so wary of being a bad citizen that I often give up my seat to people who aren’t pregnant, aren’t significantly older than me, and in some cases are far better equipped to stand than I am. If there’s one thing I am not, it’s any sort of provocateur. And yet now this: a feud.

And I don’t even know my enemy’s name.

She was on a bike when I accidentally entered her life. I was pushing a buggy and I wandered – rashly, in her view – into her path. There’s little doubt that I was to blame: walking on the road while in charge of a minor is not something encouraged by the Highway Code. In my defence, it was a quiet, suburban street; the cyclist was the only vehicle of any kind; and I was half a street’s length away from physically colliding with her. It was the misjudgment of a sleep-deprived parent rather than an act of malice.

The cyclist, though, was enraged. “THAT’S CLEVER, ISN’T IT?” she yelled. “WALKING IN THE ROAD!”

I was stung by what someone on The Apprentice might refer to as her negative feedback, and walked on with a redoubled sense of the parental inadequacy that is my default state even at the best of times.

A sad little incident, but a one-off, you would think. Only a week later, though, I was walking in a different part of town, this time without the toddler and engrossed in my phone. Again, I accept my culpability in crossing the road without paying due attention; again, I have to point out that it was only a “close shave” in the sense that meteorites are sometimes reported to have “narrowly missed crashing into the Earth” by 50,000 miles. It might have merited, at worst, a reproving ting of the bell. Instead came a familiar voice. “IT’S YOU AGAIN!” she yelled, wrathfully.

This time the shock brought a retort out of me, probably the harshest thing I have ever shouted at a stranger: “WHY ARE YOU SO UNPLEASANT?”

None of this is X-rated stuff, but it adds up to what I can only call a vendetta – something I never expected to pick up on the way to Waitrose. So I am writing this, as much as anything, in the spirit of rapprochement. I really believe that our third meeting, whenever it comes, can be a much happier affair. People can change. Who knows: maybe I’ll even be walking on the pavement

Mark Watson is a stand-up comedian and novelist. His most recent book, Crap at the Environment, follows his own efforts to halve his carbon footprint over one year.

This article first appeared in the 20 October 2016 issue of the New Statesman, Brothers in blood