Tax relief: a question of priorities

By Tom Miller / @TomMillerUK

ToryDiary and The Telegraph reported yesterday that the Tories are planning a now not-so-secret raft of tax cuts for the wealthy, in full George W. Bush style.

In order to avoid correctly placed charges from the Labour Party (that immediate cuts in spending would damage the demand cycle and wider recovery), the Tories are now seeking to appear more moderate in advance by briefing to the media that they would wait 3 years before they launched such a policy.

This in itself is typically cynical. They are leaking to the effect that this will take place, while avoiding making any announcement in a public arena. Perhaps they are seeking to test the water before embarking on such a policy in earnest. In any event, the result, as ever, is Conservative duplicity.

Some have questioned whether we need cuts in spending at all. What seemed like a consensus between the right-wing media and politicians at the top of both main parties is slipping away.

My employer, Tribune, has played a part in this. Writing under the pseudonym of ‘Arkwright’, a government figure has been quietly attacking the acceptance of the cuts mantra on the Labour side of the fence.

The Blairites may have been unsuccessful in their stated aim of removing the Prime Minister, during their most recent coup. But that is to suppose that their stated aim was their real aim. Before I am denounced for conspiracy theories, let me remind readers that this effort required a considerable amount of conspiracy, so it is hardly unreasonable to theorise.

‘Arkwright’ argues that what followed the coup lays bare its real intentions. Ultra-Blairite ministers had previously made appearances criticising the government decision to return Britain to a slightly progressive taxation structure. They were given support by Lord Mandelson, who was quoted as having said that Labour would remove the 50% top rate if it could, in other words, cutting tax for the rich. This argument ran alongside the argument from the Treasury that ‘efficiencies’ would have to be made in order to reduce the deficit; in other words that the government would have to abandon the current policy defined by stimulus, and the idea of growing out of the deficit through increased taxation receipts, and instead return to something more neo-liberal altogether.

It is my belief that the taxation precedent set by Thatcher was an irresponsible one. It was one based on fundamental injustices, the idea that it is somehow acceptable for the poor to pay more in net taxation than the rich.

This was not fully rectified by New Labour, but was ameliorated to a more humane extend by the introduction of Gordon Brown’s 10p rate, later abolished, and the subsequent imposition of the 50% rate.

It is clear that we need higher receipts from taxation if the deficit is to be cleared without devastating the economic infrastructure on which profit, wages, and subsequent taxation receipts depend.

The first element of this has to be a return to serious growth, which even Blairites accept cannot take place against a backdrop of immediate spending cuts. But economically, it also has to be sustained. This sits alongside a powerful moral and political case for maintaining public services. Many, including ‘Arkwright’ still argue, that it is indeed possible to grow our way out.

But that will only happen at any sort of pace if we are prepared to levy tax to make up the deficit.

In search of higher yields, therefore, it was both thoroughly logical and politically courageous of the Prime Minister and Chancellor to introduce a tax on non-doms, a tax on bankers’ bonuses, and the new top rate. Given the rising price of food and fuel, and the long term trend in de-unionised economies of wage stagnation, the poor have not the resources to dig us out of the bankers’ hole.

The line given in Tribune is that cuts in services are not necessary, and cuts in tax for the rich are irresponsible as long as they are mooted.

What would be even more irresponsible is the suggestion that the priority, even if we are to pursue the madness of cutting tax with a large fiscal deficit, should be on making life easier for the very rich before we seek to do it for those who lost out on the abolition of the 10p rate.

Abhorrent in the largest sense is the behavior of the Tories, who are honest about such plans with friendly newspapers and with lobbying firms, but lack the honesty of Lord Mandelson, who will at least look the public in the eye and tell them what he really thinks.

Given the deficit, we have little responsible justification for cutting tax, even VAT at this point, as we appear to be entering growth. Spending depends on tax, and, given current sluggishness on the demand side, and the relatively diminished buying power of all but the super-rich, we have very weak justification for cutting that as well.

But if we must cut tax, an argument I do not concede, we should at least have the decency to cut it for average and lower earners first. That is something we have to be honest about. Even the Express and Mail will eviscerate Labour if we do not.

Remember, 10p was where we started to slide in the polls last time.