What does Labour offer on tax now? Photo: Getty Images
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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.

 

 

 

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.