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5 August 2015

The Left needs to stop fiddling about the fringes of the taxation system

A fairer tax system is a moral imperative; reform is an essential step in the path to a more equal society, and the left should be unapologetic about this.

By Daisy Srblin

What is tax for? Redistributing the entrenched wealth of the few for the benefit of the many? Ensuring vital public services are properly funded? A means by which people feel invested in their surroundings and each other? All sounds pretty positive, doesn’t it – and figures from the Equality Trust suggest that the general public agrees. 96 per cent of people want to see a more progressive system of taxation, and 82 per cent feel households in the highest income group should pay a greater proportion than those in the lowest.  

And yet raising taxes is still perceived as politically toxic. In his recent budget, George Osborne prioritised tax breaks for the wealthiest over support for families with children, the working poor and those reliant on welfare. He also introduced a ‘tax lock’ on income tax, national insurance and VAT, effectively putting 60 per cent of all taxation revenue out of reach for the duration of the new parliament. Furthermore, the latest ONS figures show that the poorest 10 per cent pay 45p in every pound of their income in tax, while the richest 10 per cent pay only 35p in every pound.  

Experts agree that the system is not fit for purpose. The Institute for Fiscal Studies’ Mirrlees Review – hailed upon publication – stressed an urgent need for the simplification of a tax code that currently numbers 11,000 pages. Yet its findings and message were largely ignored by politicians across party lines, with sensible reforms being overlooked in the interests of short-term electioneering.  

It is now up to the left to provide an alternative. Let’s stop tinkering with a broken model, and instead come up with something new and radical, based on the fundamental principles of  redistribution and fairness. 

What could this system look like? The Fabian report ‘Tax for our Times’ provides plenty of ideas. Reasserting the salience of tax as a tool for good is vital – more needs to be done to connect the payment of taxes to the funding of strong, popular services, argues Fabian general secretary Andrew Harrop. Next, says LSE Professor Howard Glennerster, the left needs to commit itself to shifting the burden of taxation away from earned income and on to wealth, where inequalities are much greater. We should tax property and assets far more progressively.  

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Also essential is reducing tax for low income families in a way that is meaningful. The Resolution Foundation has demonstrated that touting expensive extensions of the personal allowance as a way of ‘lifting people out of tax’ is misleading, given that most low earners continue to pay National Insurance contributions. We must reform NI instead, says the Foundation’s Adam Corlett, and the indirect duties that unfairly hit the poorest hardest.   

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Then there’s the issue of who runs HMRC, and how accountable it is to the public. Richard Murphy of the Tax Justice Network says we must take on the vested institutional interests that allow policy-making to serve multinational corporations, and ensure HMRC’s board represents the interests of ordinary taxpayers.  

The public should be at the heart of debates about tax. So far they have been crowded out by technocratic, seemingly apolitical contributions dominated by highly-qualified specialists. Conducting a conversation about tax reform without the revenue-paying public does not make sense, and the failure of politicians to engage with the issue means we’ve yet to find a way to talk about tax that is open and accessible.

More than this, we need to discuss tax in a way that is value-driven. A fairer tax system is a moral imperative; reform is an essential step in the path to a more equal society, and the left should be unapologetic about this. A redistributive tax and benefits system will enhance social mobility, allowing people to fulfil their potential, irrespective of background.  

The left must therefore push for this vision of society and proudly defend tax, shaping its future reform by making the debate more publicly accessible. Tax reform should neither be locked away by politicians from public view, nor left to the expert few: it needs to be put back in the hands of the many. The public want to contribute to a system that is fair, and the left must show them how that might look. 

Daisy-Rose Srblin is the editor of a new Fabian report, Tax for our Times: how the left can reinvent taxation