It’s been quite remarkable to see Labor adjust to criticizing excessive tax, but will the main parties remember the damage that high taxes do?
May 23, 2022 5:49 pm(Updated 6:23 pm)
I never thought I would see the day when the Labor Party campaigned against high taxes. Traditionally, in Opposition as in Government, the left has ranged from arguing higher tax rates of all forms are either a necessity, or a virtue, or a combination of both.
The necessity argument is appreciable, and has the benefit of being concrete, albeit not necessarily wise. If you want to spend more as a matter of course, and believe doing so is both right and effective, then of course you’re more prone to support higher taxes. Combine that with the belief that the economy is more stubbornly resistant to costs than dynamic in response to them, and a worldview that prioritises the state over the private sector, and the collective over the individual, and it no doubt seems pragmatic to apply a squeeze for the greater good.
The idea that taxation is an active moral virtue takes a little more contortionism. In its most snappy guise, this argument is often summed up like this: “Taxation is the mark of a civilized society”.
It may of course be true that tax is part of the infrastructure of civilizations – along with sewers, roads, law, some sort of priesthood, written language, and shared material culture – but I find the next leap of logic is somewhat confused. Of course having a state involves some kind of tax base – but that doesn’t inherently mean that you get more civilized the higher your taxes become, any more than you get more civilized as your sewers get bigger, or your laws (or priests) get more numerous.
However strong or wobbly the rationale, these beliefs are nonetheless powerful within the Labor Party and its surrounding movement. However much they may protest when it’s criticized, an enthusiasm for taxing others is a distinct characteristic of socialism.
So it’s been quite remarkable to see the Opposition adjust to criticizing excessive greed on the part of the tax man. There were tentative steps towards this under Ed Miliband, when “tax” was first used as a somewhat dirty word by Labor politicians: remember when they attacked George Osborne for the “pasty tax”, the “bedroom tax” and the “granny tax” .
Under Sir Keir Starmer’s leadership, they’ve gone even further – proposing that new Brexit freedoms should be used to cut VAT on energy, for example, and vociferously attacking the rise in National Insurance as a “jobs tax”. It absolutely is a jobs tax, of course – it’s just extraordinary to hear that traditional Conservative term uttered by a leader of the Labor Party (and, it must be said, frustrating to see a Tory government hiking it).
I doubt that this has come about thanks to any fundamental ideological conversion among the Opposition – Sir Keir on the road to Damascus, dazzled by the revelation that high tax is in fact a bad idea. Rather, economic reality has forcefully intruded upon fiscal fantasy in the form of the cost of living crisis that I predicted in this column last July.
In the face of such vast, global inflationary forces – post-pandemic shortages, war, supply chain disruption, the aftermath of huge money printing to get the world through lockdown – both sides of British politics find their cupboard is rather bare, particularly in terms of how to compel the private sector to curb the crisis.
Windfall taxes might sound catchy but they don’t do much good for very long, and come at a sizeable cost. Begging for more investment often falls on deaf ears (and all the more so if people think windfall taxes are a credible risk). They’re even conflicted on pay, by necessity – simultaneously paying lip service to the idea people need to earn more, while also feeling cautious about the risk of fueling further inflation.
If politicians can’t make much difference in things they do not control, then they inevitably start to look at things they do control – and tax sticks out for obvious reasons. It might have been treated as a simple means to an end, or as a measure of civilizational virtue, but in fact the tax rate is a bread and butter cost of living issue, particularly when inflation is roaring, recession threatens, and the tax take is simultaneously at the highest level for decades.
The Conservatives, too, are moving on this issue – not only because Starmer has changed Labor’s tune, but because the polls show the traditional party of low taxation is lagging behind both on who can be trusted to set your taxes but also on who can be trusted to spend them most efficiently. One suspects that recent announcements about Whitehall efficiency are an initial sign that Downing Street realizes it has to stop raising taxes.
That’s a welcome, if belated, shift. But it’s all very well accepting that high tax is damaging once we’re in a crisis and people are crying out for relief. The real test will come once times are good again – whenever that may be.
Will the main parties remember the damage that high taxes do? Will today’s converts, of left and right, learn the lesson permanently, and realize that low taxes in a strong economy produce a more robust society, with greater savings, to weather the next downturn? I fear they will revert to type, and return to bad old habits.
Mark Wallace is the chief executive of ConservativeHome, a blog that is independent of the Conservative Party