Social Democrat Ed Miliband rejects “significantly higher tax and spending”

February 21, 2013 7:59 am

Speaking to Bloomberg whilst on his Scandinavian trip this week (from which he has now returned), Ed Miliband rejected the idea that britain could become a high tax and spend nation like Sweden or Denmark, saying:

“There are some lessons you can learn, and some things that are different. They’ve always had a tradition of significantly higher tax and spending, which we don’t have in Britain and aren’t going to have in Britain. We’ve said that we want tax cuts for low and middle income families. That’s a sign of a fairer tax system; it’s not about higher taxes.”

Interestingly this echoes what one of Miliband’s closest aides told me last week – suggesting a deep level of thought about both the lessons Labour can learn from Scandinavia, but also the profound differences between the countries. As I wrote on Sunday:

“There has clearly been plenty of thinking about Scandinavian Social Democracy in Miliband’s office recently. Some Miliband supporters – and detractors – think he’s something of a Scandinavian Social Democrat himself. Interestingly, when I spoke to a senior Miliband aide last week they said that what interested them most about Scandanavian economies was less their reliance on tax and spend, and more the highly skilled and educated population, leading to low wage differentials between the top and bottom of society.”

As Duncan Weldon noted yesterday, Miliband’s aim will be to reshape the economy, but that is unlikely to come through the state acting to correct the market after pay, but before pay by focussing on the skills shortage and the need for highly skilled jobs. You might even call it “predistribution”.

  • Adam Lent

    You might even call it New Labour.

  • Alexwilliamz

    “what interested them most about Scandanavian economies was less their reliance on tax and spend, and more the highly skilled and educated population, leading to low wage differentials between the top and bottom of society.”

    But is there a link between the two?

    • aracataca

      Really good point Alex.

    • JoblessDave

      A valid question, but until the quality of (primarily secondary) education in this country is significantly improved, I would say no, and I would argue that this is not simply a money thing: part of the challenge is an attitude (something that I have only ever experienced to the UK although I am reasonable sure must exist elsewhere) that we have developed whereby the “mid-level bulk” of our students simply do not seem to have the hunger to push themselves to learn and excel (I would contrast this with the education in Denmark, Singapore or Hong Kong, or even Kenya, with which I am also familiar, and where I would not be surprised on current trends if their educational attainment levels surpass that of the UK within a generation), and instead our students seem to aim only to cruise through school, passing the exams only at the level needed to get to the next stage.

  • JoeDM

    It seems that Ed has been studying the Blairite skills of ‘triangulation’.

  • NT86

    Don’t the Scandinavian policies work in part because of those countries’ relatively low populations? Compare that to Britain which is projected to cross the 70 million mark in the next few decades.

  • http://twitter.com/PaulBHalsall Paul Halsall

    Population sizes have nothing to do with it. The taxes and expenditures are scalable.

    Denmark consistently comes out has happiest country: we should emulate it.

    • Quiet_Sceptic

      Denmark does have half the population density of the UK. Population densities of Norway and Sweden are far lower still.

      You can’t entirely ignore population, given that a proportion of economic activity is based on resource/land related activities having lots of natural resources relative to population would result in higher standards of living.

  • Daniel Speight

    I guess taxation is still regarded by the many in control of party policy as just being too toxic. It’s a shame in a way because if we want a balanced budget (a good idea) and we don’t want to decimate all the social policies (another good idea) then taxation has to fill the gap. At the same time progressive taxation will make for a more equal society.

    • Quiet_Sceptic

      Yes but there’s also that minor issue of getting elected and whilst many people value public services most don’t want to pay more tax.

  • David Parker

    How sad to hear Ed Miliband fudging the tax issue.. Without a coherent reassessment of the entire fiscal system embracing local, central and indirect taxation the means to pay for a civilised society will not be found. The timing of his comments is also unfortunate as we are undoubtedly entering a period when many of those with disposable income who could pay more are learning once again that their life-style and expectations are better served by sustaining the social fabric.

    • JoeDM

      Its ‘triangulation’ again. Directing specific comments at specific parts of the electorate.

      I don’t believe a word of it.

    • Simon

      You seem to be confusing “civilised society” with the state. The two are not the same thing.

  • http://twitter.com/citizen_colin Colin McCulloch

    The card still says “democratic socialist” – we must argue for progressive taxation and spending, not Tory-lite policies.

    • http://twitter.com/waterwards dave stone

      I reckon you’re failing to appreciate the scale of Ed’s ambition – taxation for him is tinkering at the edges while leaving the main body of the problem untouched.

      As Duncan Weldon writes in the linked article: ” this is a debate about refoming our model of capitalism”, so this is big stuff, not Tory lite nor Blairite triangulation but something, as the saying goes, completely different.

      There’s another piece referenced by Weldon that’s well worth a reading:

      http://shiftinggrounds.org/2013/02/ed-miliband-leads-a-turning-point-in-progressive-thinking/

  • aracataca

    If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further. But I think that people at the high end – people like myself – should be paying a lot more in taxes. We have it better than we’ve ever had it.
    – Warren Buffett

  • aracataca

    Imagine there are two identical twins in the womb, both equally bright and energetic. And the genie says to them, “One of you is going to be born in the United States, and one of you is going to be born in Bangladesh. And if you wind up in Bangladesh, you will pay no taxes. What percentage of your income would you bid to be the one that is born in the United States? – Warren Buffet

    Creating wealth depends on living in a country with an adequate social and material infrastructure.

  • Amber_Star

    People seem not to be putting this in context. Ed M is for taxing unproductive wealth – hence the Mansion Tax; he is in favour of people contributing some of their income to the common tax good – hence the 10p rate, rather than a further increase in the tax free allowance.

    But the first priority must be full, productive, employment at a living wage. That is a huge undertaking which will require a quantum shift in the way the UK economy is structured.
    Two necessary steps towards making the UK a place where good companies are facilitated & not-so-good ones discouraged could be to completely reconfigure company law & corporate tax law. I’ll skip over the company law stuff, or this comment will be over-long!

    The corporate tax law structure should consider both the companies’ UK turnover & total tax contribution. So, a company which pays VAT, employs a large number of people at rates which generate paye & NIC’er (i.e. living wage) should pay less CT on turnover than a company which doesn’t pay VAT & has relatively few, poorly paid, UK employees. Was anybody thinking about Amazon when they read the not-so-good company description? ;-)

  • Amber_Star

    People seem not to be putting this in context. Ed M is for taxing unproductive wealth – hence the Mansion Tax; he is in favour of people contributing some of their income to the common tax good – hence the 10p rate, rather than a further increase in the tax free allowance.

    But the first priority must be full, productive, employment at a living wage. That is a huge undertaking which will require a quantum shift in the way the UK economy is structured.
    Two necessary steps towards making the UK a place where good companies are facilitated & not-so-good ones discouraged could be to completely reconfigure company law & corporate tax law. I’ll skip over the company law stuff, or this comment will be over-long!

    The corporate tax law structure should consider both the companies’ UK turnover & total tax contribution. So, a company which pays VAT, employs a large number of people at rates which generate paye & NIC’er (i.e. living wage) should pay less CT on turnover than a company which doesn’t pay VAT & has relatively few, poorly paid, UK employees. Was anybody thinking about Amazon when they read the not-so-good company description? ;-)

    • jaime taurosangastre candelas

      The mansion tax is not a tax on unproductive wealth, because a house is a house, whether valued at £20,000 or £2 million. So long as it is providing the key function of a house in providing shelter, it is by definition productive. Even shares are productive, for those that trust them: they go up and down, and create wealth for pension funds to disburse among the pensioners. A house only becomes unproductive if left empty (and there are lots of houses so left), but that is not what Ed is aiming at with his mansion tax nonsense, and he probably should be.

      A mansion tax is nothing more than an envy tax. An empty house tax is a much quicker way to raise revenue, and force private landlords to dispose of properties that could then be bought ready-made by Housing Associations and quickly (after any repairs, making good, etc) put back into productive use as houses for real people to live in. It is merely the micro-application, and “door-opener” to a systemic Land Value Tax.

      Unproductive wealth are things like gold soveriegns buried in a field in Devon. I’m guilty of that, although to nothing like the extent that Ed would dare lower a taxation level to (and if he forecast it, the coins would disappear quietly to be reburied in Canada before any new measures were passed and such reaction became illegal). Also, Intellectual Property unused if it could be applied for a public good, and land banks held “on the books” of supermarket chains, when the same land could easily be used for putting up social housing.

      • jaime taurosangastre candelas

        …an “Empty House Tax” – after a grace period of perhaps 6 months, allowing for death / inheritance, or gaps in tenants, or major renovations – could be levied down to normal house valuations of about £150-200k, and in so doing include many more houses than the £2m proposal. What could you set the rate at? 5% per year of unoccupation would very quickly “sting”. What landlord is going to sit on a £7,500 a year charge for his empty £150,000 property? And it does not have to be revalued, the charge is set based on the pre-existing council tax band, of which everyone has stopped arguing. It is already an accepted fact.

        I suspect it would be better to frame the charge as a “penalty” from Government for removing useful accommodation from domestic use. As soon as it is back in use as housing either rented or sold, the penalty stops.

        Doing some numbers with Excel, based on the same dataset of the Land Registry that was so much in contention between Aracataca and the David Postles and myself in the last few days, it looks like £2-3.5 billion per year, based on an un-occupancy rate of 1-1.75% of all houses. Of course, I have no data on emptiness of houses beyond walking around in my own little town, in which it seems that about 1-2% of house have up the shutters.

        And if the penalty policy has the proper effect, those houses will quickly be relet or sold, both of which providing additional affordable housing to a local community. The revenue raised from the penalty is not the point: that is to get houses more freely available to those who can afford them if only the rent was not so extortionate.

        It might even be a “first” for Government: “We actually want the revenue from the penalty to reduce each year, because it means that people have more houses to live in at affordable rates, and it is because we forced the issue”

        • JoblessDave

          A hugely interesting proposal, steeped in fairness and pragmatism, although let us not pretend even that would not be controversial amongst some, nor without some challenges in implementation and as people look to overcome it (I am thinking of the impact of unsellable properties – especially in estate liquidation or inheritance, or of the possibility of deliberate short-term occupation being used as a means of avoidance), but these are details that can be developed.

          I wonder if the “down” voter actually read your suggestion, or simply reacted to the fact that your name is not Ed and you are not agreeing with a man called Ed.

  • http://twitter.com/labourmatters Labour Matters

    We’re already a high taxation country, the problem is that the tax falls mainly on those least able to pay it. Labour needs to grow some balls (no pun intended) and look at shifting the burden of tax from consumers and workers to business, particularly the banks.

  • http://www.facebook.com/people/Mike-Homfray/510980099 Mike Homfray

    I think it’s unlikely as well simply because of the lack of electoral popularity. But it does restrict what can be provided in consequence .

  • Monkey_Bach

    I doubt many Swedes of Danes would want to swap their lives for ours. Eeek.

    • Alexwilliamz

      Depends whose life! Which is the problem with inequality.

  • http://twitter.com/ElliotBidgood Elliot Bidgood

    There are certainly lessons we can learn from Scandanavia. The decentralisation ethos in their healthcare systems and public services is something to be emulated, and indeed may have some relevance to the tax question. In Denmark, public hospitals are financed and run at the local level, not by whatever the Danish equivalent of Whitehall is (it’s also worth noting that this was the case in the NHS to some extent pre-1974, and may have been the case to an even greater extent at the organisation’s founding had Nye Bevan not defeated Herbert Morrison at the cabinet table on the question of nationalisation in 1946). This brings services closer to people and perhaps allows local variation, and I’ve heard it argued that it might explain why the Danes are willing to pay more taxes – they feel that their services are more accountable to them and are therefore more worth paying for. I think it’s the same in Sweden to some extent as well.

    Their health systems also remain superior to ours, and present a perhaps uncomfortable challenge to our common assumption that our NHS is the envy of the world – Iceland, Norway, Sweden and Denmark spent roughly the same amount of GDP on health as us, but generally beat us (sometimes by quite some way) in international rankings for preventable mortality, potential years of life lost, infant mortality and numbers of doctors and nurses proportional to population. Altogether, Ed’s trip couldn’t be more important.

  • Redshift1

    One thing always gets skipped out of this analysis. The industrial relations system.

    Sweden not only has union membership density of well over 70% of the workforce (compared to around 27% of the UK’s), it has bargaining coverage in nearly every workplace. Unions have negotiated on a sectoral basis for a long time too, always prioritising increases for the lowest paid over maintenance of differentials. The near universal bargaining coverage and nature of the approach to negotiations has meant that basically anyone in work is paid pretty well by British standards. It’s a fantastic achievement.

    Anyway, my point is that Miliband can’t get the high skill, high value labour and the small differentials just by looking at education and rebalancing our reliance on services. Now he is actually correct that you don’t necessarily need to as far as the Scandinavians tax and spend wise (as much as I might like him to) to achieve what he wants to, but he will have to look at the industrial relations system in the UK and find a way to massively expand bargaining coverage, which either means repeal Thatcherite anti-union laws or legislating in some way to force more companies to negotiate over pay (lots of ways to do that by the way).

  • David Parker

    You have lost me here. They do overlap but I meant ‘society’ and not ‘the state'; decent education, welfare provision, public transport, cultural opportunities, pleasant town centres are not just attributes of the state.

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