Leading Article: A better way to pluck the goose

BRITAIN'S two largest political parties are haunted by the unpopularity of taxation. The poll tax destroyed Margaret Thatcher. Labour blamed its fiscal plans for defeat in the last general election. The withering of support for the present government is closely linked to its imposition of VAT on fuel.

Yet the Liberal Democrats tell a different story. Their pledge to put a penny on income tax is said to have won them votes in 1992. The reason? Voters liked the idea that the money would be spent on education and not simply disappear into a black hole.

Yesterday Paddy Ashdown's party again set out to show how authority and legitimacy might be strengthened in the business of raising government finance. In Being Honest About Taxation, the Liberal Democrats detailed how citizens could exert greater influence on the size and fate of the state's tithe.

Each household would receive an annual breakdown of how its taxes were raised and spent. Local projects such as a new metro system or sports facility could be funded from one-off taxes sanctioned by referenda. More controversially, the document suggests earmarking (hypothecating) cigarette and alcohol duties to special NHS projects. Increases in health spending above inflation would be funded from a ring-fenced tax.

There are dangers. Given the choice, voters might opt for extra hospitals when public health might be more effectively improved by other means. But hypothecation would lead to a better-informed electorate, for experts would have to convince the public rather than merely the administrative elite.

There are further problems. The suggestion that National Insurance contributions be set aside to pay pensions (but not unemployment benefit) seems odd. Today's workers would still fund not their own old age but that of those already retired. So they would feel no more of a link than now with the purpose to which their money was put.

However, these proposals are, on the whole, sufficiently pragmatic to avoid allowing a fickle electorate to tie the hands of Government. They promise to devolve tax-raising and improve local accountability. The Liberal Democrat plans would help to lift some of the obscurity and deception that has dogged the argument about state finances.

Jean Baptiste Colbert, who doubled Louis XIV's revenues in a decade, said the art of taxation consisted in so plucking the goose as to get the most feathers with the least hissing. Mr Ashdown's imaginative approach to fiscal husbandry has potential. His proposals could lead to more open, fruitful discussion replacing today's nonsensical debate about which party can most reduce taxation - while simultaneously promising to spend more on public services.