LEADING ARTICLE: Let's be adult about tax Taxing issues for Labour

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The Independent Online
"DEATH AND taxes and childbirth!" wrote Margaret Mitchell in Gone With the Wind. "There's never any convenient time for any of them." Politicians take it as axiomatic that nobody votes for higher taxes. But it is equally true that nobody votes for reductions in services or for lower pensions. So one party promises tax cuts without reduced services while the other promises improved services without higher taxes. Is it possible that the British public is ready for a serious and adult discussion about these matters?

Paddy Ashdown should be congratulated for at least trying to get one started. A certain scepticism is, of course, justified: Mr Ashdown will still get votes because nobody expects him to be in a position actually to put taxes up. (Even the public support for his famous 1p-for-education pledge in the last general election is a bit of a myth because most voters thought it meant 1p a week.) But there is no reason, except political cowardice, why taxation should be almost a taboo subject in British public debate. If Labour is to remain a left-of-centre party in any sense whatever, it must argue the merits of taxation and not accept the Tory right-wing view that taxes, in any form and at any level, are spiritually disabling; that, as Francis Bacon put it 370 years ago, they inevitably prevent a people from becoming "valiant and martial".

With each succeeding Tory administration, it becomes more difficult for Labour to speak in favour of taxation. Low taxes become part of the national culture; to advocate, say, a 30p standard rate, a level of income tax that people accepted quite equably less than a decade ago, is assumed to court electoral annihilation. A tax cut provides immediate and measurable gratification; a tax increase promises remote, uncertain and not easily quantifiable benefits.

If they are to accept the case for taxation, voters must be convinced of two things. First, they want to believe that taxes are fair. Labour should shout from the rooftops the unfairness of the present system. The Tories have so altered the nature of taxation that millionaires pay a far lower proportion of their total incomes in taxes (including indirect taxes and national insurance contributions) than, say, nurses, teachers and police officers. Of the pounds 31bn taken off income tax in the 1980s, pounds 15bn went to the richest 10 per cent of the population. Taxation has become so regressive that the poor, if they improve their incomes, pay the kind of marginal rates (above 90 per cent) that punished the rich in the 1970s and which were then so roundly condemned for their disincentive effect. In 1949, a family man on average or below-average wages would expect to pay no income tax at all. Now, even a man on less than 25 per cent of the average may have to pay. The case for raising the rate on higher incomes to 50 per cent (a level accepted in, for example, France, Germany and Japan) is overwhelming. To argue that it would not significantly improve government revenue is to miss the point: increases in the standard rate, which bring in the big money, will be resisted unless voters think the better-off are paying their fair share.

Second, people must believe that what they pay in tax will not be wasted. This is why Labour should continue to fight hard for value for money in the public sector, as its policy statement for local government proposed last week. Indeed, Labour would be better placed to get good performance in education and health if it could jettison the expensive complexities of the Tories' bogus markets and if it could convince teachers and nurses that it genuinely valued their work rather than regarding them as idlers and incompetents engaged in some shady, anti-social racket.

The Tories' approach to taxation involves some of the biggest hypocrisies of modern politics. They claim to abhor taxation butimpose income tax on a higher proportion of the population than any other peacetime government this century. They claim to believe in sound finance but, like the Republicans in America, allow government borrowing to soar when it does not suit them to increase taxes. They claim to favour prudence and thought for the future but have neglected to invest in public services and capital stock in order to finance tax cuts and so fuel short-term consumer booms. Tony Blair has repeatedly promised that he will be better at matching actions to words. But he will be guilty of at least a fudge, if not hypocrisy, if he does not soon come clean on taxation.

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