It’s late already: only six weeks to prepare the way for what’s to come. Everyone knows taxes will rise on 26 November, budget day. Speculation runs wild, often malevolently designed to frighten. Will she, won’t she break her pledge not to raise the three big taxes? Even if the chancellor keeps her promise, people already think she’s broken it. She (unwisely) promised tax rises were one-and-done at the last budget, so best to raise a hefty sum now as she’ll be damned anyway.
In the old saw, taxes are certain: what’s uncertain is whether they threaten the death of this government. She is some £40bn short, but she’s not short of super-abundant advice. But though everyone knows tax rises are coming, neither she nor the prime minister are rolling the political pitch to explain why this must happen and expound the choices.
Above all, now is the time to illuminate first political principles – the civic and moral virtues of taxation itself, which is not a burden but the price of civilisation. Since there’s no avoiding it, make a political virtue of necessity. Remind people what their taxes buy, retell what cuts and austerity did to the public realm and tell voters truths they don’t know: Britain is a lower-taxed nation than its neighbours, and it shows. Ask not what tax cuts will do for your pocket, but what taxes will do for everything that matters most in life.
On what would have been her 100th birthday on Monday, the right memorialised Margaret Thatcher, who ignited the nation’s tax-phobia, setting off explosive wealth inequality. (A suitable memento is up for auction, her mother-of-pearl caviar set in a red leather Asprey box.) She redefined tax from a citizen’s contribution to society to a cash-grab by a greedily wasteful state. You will always spend the pound in your pocket better than the state will, she used to say. That’s for Labour to defy, reminding people of life’s basic values. Ask voters what do you care about most? Security of family, neighbourhood and country. Certainty of good treatment in sickness, everyone’s children well-educated for national thriving and support if stricken by bad luck. Streets, parks, public spaces to be proud of, with stadiums, museums and galleries to enjoy. Your tax pound buys what the pound in your pocket never can. That’s the song about hope for the future.
Tax reform is the other tune, ironing out irrationalities of relief-riddled injustice. Broader shoulders can carry more weight, but without pretending everything can be paid for by the rich. The Resolution Foundation exposes that the wealth gap between old (early 60s) and young (early 30s) has more than doubled since 2008: a shift not gained through enterprise, but mostly through an unearned property boom. Look how wealth has shifted from public to private pockets, causing public squalor amid private wealth. These facts Labour needs to state.
The great regret, Labour’s original sin, was that fateful pledge not to raise the three taxes collecting approximately 75% of tax revenue; Labour would have won the election anyway. Most authorities say raising income tax is the least economically disruptive, including the Institute for Fiscal Studies (IFS), the National Institute of Economic and Social Research, Prof Sam Freedman of the London School of Economics, psephologist Peter Kellner and many others. But the answer seems to be no: Reeves lets it be known she requests no costings on raising the three forbidden taxes.
Further sins? Why was the chance missed to change course having opened the Treasury books on their first day and having found a genuinely shocking level of cheating? No funds existed to pay for 40 new hospitals and roads without budgets, and Labour claimed Jeremy Hunt’s national insurance tax cut was not financed, while every public service was burned out, with councils tipping into bankruptcy – not through fecklessness but through sabotage. The chance was missed, with Russia’s invasion of Ukraine causing Donald Trump’s demand for huge extra defence spending, plus his terrible tariffs. The IFS says all governments colluded in a “conspiracy of silence” about the state of UK finances. It and others plead for a tax-reforming budget, no more “directionless tinkering and half-baked fixes” to get by for now: straighten out council and property taxes, wealth-related taxes, fuel and road taxes and pension reliefs generous to the rich. There has been no word from the Treasury on radical reforms.
When I reached pension age my payslip jumped up with no national insurance to pay. Why? All income should be subject to the same tax and national insurance, earned and unearned, that of pensioners, landlords, shareholders and the self-employed, while equalising capital gains. The Resolution Foundation proposes an ingenious compromise. Raise income tax by 2p but cut national insurance by the same, yielding £6bn from non-earners, protecting all working employees as promised.
It’s no use asking the public: polling commissioned by Tax Associates shows they always choose to tax someone else. Their top four options were gambling, capital gains (only 0.5% pay), banks and VAT on private schools, all good but not nearly enough. That’s why Labour needs to explain the hard tax facts of life.
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The chancellor’s inbox is stuffed with enough good tax suggestions to prevent repeating this torment another year, enough to stave off bond market hell-hounds – and end the two-child benefit cap. Since raising tax is unavoidable, it’s time to proclaim loudly the political meaning of her choices: protecting employees while taxing unearned income. Talk up the virtue of tax, talk up the worth of work and point to the urgent need for wealth in idleness to pay its dues.
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