Comment: Admit it, Mr Brown: higher taxes are a necessary evil

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The Independent Culture
TRY TO imagine this exchange when the House of Commons returns next month/year/century/millennium. Francis Maude: "Will the Chancellor of the Exchequer please admit what he has so far failed to admit, namely, that the tax burden has risen since Labour came to office in May 1997?"

The Chancellor of the Exchequer: "I am glad to do so. The tax burden has indeed risen modestly in that period. I have placed a detailed analysis of that increase and subsequent projected increases in the House of Commons library. Let me tell the honourable member that I am proud to belong to a government that has not been frightened of raising taxes in order to procure a juster society. Unlike the honourable gentleman who has revelled in a rash and irresponsible promise to reduce public spending year by year as a proportion of gross national product, whatever the economic circumstances, I have no hesitation in reasserting that taxation is an essential precondition of a safer, healthier and economically successful society.

"First, all of us, including the better off, benefit from the redistribution that I have skilfully begun to carry out in successive budgets (and which is also desirable in itself). After all, the rich benefit as well as the poor from the reduction in crime that should follow lower unemployment and a reduction of inequality, from an increase in the skills and adaptability of our workforce, which will lead to greater national productivity, and from the reduction of congestion that will result from a fast and efficient public transport network. The idea that these highly desirable goals can be achieved while inexorably cutting taxation, as the honourable member's party proposes, will never be believed by the British people. But even if it was, it would still be wrong in principle."

Such a parliamentary answer from the Chancellor of the Exchequer - let alone the Prime Minister - is highly improbable, of course. It breaks a taboo that, while recent in origin, at least in the Labour Party, has nevertheless put down deep roots. To speak approvingly of taxation, especially of taxation for the purposes of redistribution, remains difficult to the point of impossibility for most New Labour politicians. The 1992 election defeat and the widespread view, promoted most actively after it by Gordon Brown and Tony Blair, that the assumption embedded in Labour's programme - that taxes would have to be raised in order to pay for that programme - was to blame is now too much part of New Labour folklore to allow such statements to be made in public.

But can that taboo ever be lifted? More important, should it be? A provocative pamphlet to be published tomorrow answers "yes" to both questions. Selina Chen, research fellow at the commission on taxation and citizenship set up by the Fabian Society under the chairmanship of Professor Raymond Plant, attempts to rehabilitate stable tax levels as an essential component of a modern social democracy. One of Ms Chen's strengths is that she is not an unreconstructed Old Labour neo-Keynesian who simply assumes that all public spending is per se good. Indeed she argues that the voting public's willingness to pay taxes is directly related to its expectation that it will get value for money. To that end, she proposes that an independent agency - perhaps an amalgam of the National Audit Office and the Audit Commission - be established to examine the performance of central government, thus increasing confidence in public services and hence in the value of taxation. She also argues that hypothecation - an innovation already introduced by Mr Brown in respect of congestion charges, the fuel escalator and tobacco tax - and referendums (at least in local government) can be used to underpin the credibility of taxation for specific purposes.

Ms Chen is sceptical of the increasingly fashionable view that the global economy and the growth of e-commerce will make it more and more difficult for member states to levy taxes at all. She points to research done for the Plant commission, which casts doubt on the idea that the countries with the lowest taxes will always attract the greatest inward investment and that physical goods are no less taxable because they are ordered by Internet. Second, she points out that modern governments, including the UK's, are - rightly - increasingly taxing "bads" such as pollution and waste.

More important, however, is her optimism that a social democratic case for taxation can be made more boldly than it is at present and that such a case will need to be made if centre-left governments are to sustain and improve public services such as health, education and transport. Although Ms Chen does not say so explicitly, one of the most deep-seated objections to taxation among the voting public, particularly among swing voters in marginal constituencies, was the - often justified - assumption that the money would be wasted and in particular that public services existed as much for the producers as they did for the consumers. (To take the single example of the NHS, the producers meant in that context hospital consultants and administrators as much as ancillary staff.) The more services are seen to improve for the consumers, the more the consumers may be prepared to pay for them through taxes. She argues that a Labour government could, under certain circumstances, increase tax and spending by up to 2 per cent of GDP without undue pain, electoral or economic.

Some of this is controversial. For example, Ms Chen says that Britain's tax burden as a share of GDP is "at the low end of the international league table". That is true by European standards but not by those of the US or the Far East. And she is at her least convincing when she argues from polling evidence that the public are willing to pay higher taxes for a more equal society.

She is, nevertheless, clearly on to something. One of the oddities about the parliamentary answer Mr Brown could not make is that he probably agrees with most of it. During the John Smith period, the modernisers were rightly sceptical of appeals to "altruism" to underpin taxation. But they used to argue, at least in private, that a measure of redistribution was in the enlightened self-interest of the better-off as well as the poorest, because of the more comfortable and less dangerous society it helped to provide. They may need to revisit those arguments - and in public.

Mr Brown's prudence on public spending has, so far, been based on the entirely correct view that public services have to show themselves capable of higher standards of delivery to justify increased spending. But nobody thinks that a modern British health service - inexpensive compared with many other countries' - will not need more money as well as further reforms. It is then that the case for limited increases in taxation kicks in. At the very least, Ms Chen is suggesting a new, more mature kind of debate. One in which the press does not always judge a Budget on the basis of the disposable income it leaves the average family with. One in which the parties do not merely approach elections running a Dutch auction on which one will reduce taxes the most.