Income tax and the anti-political agenda

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THE BUDGET gave anyone who cared to look a good glimpse of what Tory politics will be all about in the mid-Nineties: the erosion of income tax; a new emphasis on exporting industry; light government. So far, so attractive. But there is another theme that is only starting to become apparent, and which ought to give everybody, from ministers to voters, pause for thought. It is about the biggest political subject of all - the relationship between the individual and the state.

It could be called taking the politics out of British politics. Sounds a good idea? It probably began with the best of intentions. It was all about ending the strife of local politics, delivering services more efficiently and creating a tranquil Pax Conservativa. It was a vision with much merit. But, if unchecked, it will quickly turn malign. Indeed, it may be what we end the Nineties arguing about.

Let's start with that homely subject, income tax. We British have always had a thing about it, hating it with special fervour. At elections, the size and direction of income tax seems to matter more to voters than anything else. It is invasive in a way that spending taxes are not. Every taxpayer has a personal relationship with the Inland Revenue, has to fill in a form and reveal his or her financial affairs. The arrival of income tax in the last century, mostly to fund overseas wars, was a beachhead won by the state in upper- class, and later middle-class, homes. True Tory radicals have neither forgotten nor forgiven that invasion.

Spending taxes seem benignly impersonal by comparison. VAT is general, anonymous and mundane, a nagging irritation to a country that has been used to ever-rising prices, but not an annual outrage. The relationship between the taxpayer and the state is made less painful, less personal: VAT pushes it, literally, into the marketplace.

The political results of this can be seen in election after election. The Conservative Party noticed how hated income tax was, and how little hated indirect taxes were, long before Labour. Since Margaret Thatcher's victory in 1979, the trend has been clear: income tax has gone down and indirect taxes have gone up.

I am assured that there is no hidden blueprint in the Treasury for the process to continue; but it is equally clear that Nineties Conservatism will be partly about replacing income taxes by spending taxes, so far as that can be achieved. Newspapers, books, children's clothes and public transport may have escaped VAT this year. But they were seriously looked at during the past few months and will be snapped up sooner or later. Voters will be offered lower income tax or (for increasing numbers) no income tax, in compensation. And history suggests that voters will consider it a bargain.

This historic change has some very strong economic advantages. Leaving income alone while taxing spending will, presumably, encourage investment and savings, something Britain badly needs. But here the wider pattern becomes relevant. At just the time the relationship between the individual taxpayer and the state is loosening, so is the one between the individual voter and those who spend the voter's money.

One of the first to articulate this was Professor John Stewart, of Birmingham. Last year, in a paper for the European Policy Forum, he said we faced a crisis of accountability caused by the weakening of local government and the rise of unelected quangos, albeit designed to give parents and others more choice.

'In 1888 responsibility for the administration of counties was taken away from the magistrates, a lay appointed elite, and given to elected councils. A new magistracy is being created in the sense that a non- elected elite are assuming responsibility for a large part of local governance. They are found on the boards of health authorities and hospital trusts, Training and Enterprise Councils, the board of governors of grant-maintained schools, the governing bodies of colleges of further education . . .'

The membership of these bodies is largely unknown locally, they are not as open as local authorities and they are rarely directly or immediately accountable to ministers. Consumer power and the use of contracts cannot fill the gap, either ('to say one has fulfilled one's contract can be to deny responsibility rather than to accept it'). Professor Stewart predicts political crises as money is misspent, local people become angry and 'it is not clear who should be held responsible'. Unless ministers are very careful, these arguments could be applied to central government's new agencies with similar force.

The same problem has been spotted by the Commons Education Select Committee. In its report on education spending, (which leans heavily on work by its specialist academic adviser, Tony Travers) it angrily criticises the impossibility of finding out who spent what on Britain's state schools.

This is what the MPs say: 'The problem that faces us is that it is impossible to know which authority to hold accountable for any shortcoming in educational provision or use of resources. Should a parent aggrieved because the roof of his child's classroom leaks blame the governing body of the school . . ? Or should he blame the LEA (local education authority) for spending money on town halls and public relations . . ? Or is it the fault of the Secretary of State for the Environment . . ? Or the Secretary of State for Education . . ? These are serious and difficult questions . . .'

You bet they are. The connection with the slow death of income tax is a philosophical one, but this is philosophy with hard edges and everyday results. The difficult, but clear, historical and direct relationship between Citizen- Taxpayer and the Inland Revenue is becoming more vague because of the rise of indirect taxation. Agreed? Similarly, the difficult, but clear, historic relationship between Citizen- Voter and government, in the widest sense, is being blurred by the growth of indirect government, the quangos and agencies.

What is the result? The citizen ceases to notice so starkly the money being taken in tax, and simultaneously finds it much harder to discover who is responsible for spending it. A vagueness, and perhaps a passivity, enters a system once characterised by clarity and controversy.

In no sense do I suggest a malicious conspiracy - indeed, there are obvious dangers here for the very Conservatives who are half-consciously promoting this anti- political agenda. But these are murky and perilous waters for us to calmly walk into, and they deserve a wider debate.