04 December 2005

The Left have to persuade people to trust and treasure our public services AND the taxation that pays for them.

Nobody is all that enthusiastic about paying their taxes, but most are enthusiastic about health, education, basic welfare etc. The association between these things has been cleverly severed by the Right in the last few decades, with people now associating taxation with waste and bureaucracy or even worse.

I have heard people talk about their taxation as if it is all going into Gordon Brown's back pocket or mysteriously the government gets it all. It's as if the government's expenditure has nothing to do with them. There is a total disassociation in the public's mind between the taxes they pay and the services they receive. This is not surprising, given that this is the message fed to them daily by the press.

Yes, some of our taxation is wasted and bureaucracy is a cancer, it is like rust in your car. Once it gets a hold, it spreads fast and is difficult to get rid of. Both Tory and Labour governments have had little success in reducing government bureaucracy, but it has to be put into perspective. Bureaucracy still makes up a small percentage of government expenditure, most of the spending goes on front line services that people want.

I've heard right wing commentators in the press and Tory MPs talk about 'the need for small government' and that individuals 'know best how to spend their money'. I know this is not going to be a popular thing to say but; I'm afraid a lot of individuals do not 'know best' how to spend their money.

What is more wasteful, the billions people spend on alcohol, cigarettes, and burgers or the billions wasted on bureaucracy? Neither is all that attractive, but in that comparison even bureaucracy doesn't look too bad. Of course the real comparison is between how much people would spend on their health and welfare and how much taxation is spent on front line services. Comparing these makes taxation look the best deal.

We have to make people realise that taxation is useful, good even, and that people are unlikely to spend their money as wisely. We only have to look at the pension debate or look to the USA to see how individuals would neglect (or not be able to afford) things like health and long term welfare (of course state funding in these areas is also more cost efficient than private insurance). We have to ensure that a decent level of public services are provided for BEFORE we give out tax cuts. But how do we decide the level of taxation? Are our taxes too high, like so many people think?

All that matters about tax is the following.

1. The overall tax burden.
2. How it is raised and who has to pay it.
3. What it is used for.

This year the tax burden is 38.3% of GDP.
The average tax burden since 1997 is 38.4% of GDP.
The average under the Tories from 1979 to 1997 was 40.6% of GDP

All these figures and all you need to know about tax is here at the independent Institute for Fiscal Studies (IFS) that sometimes even the Tories selectively quote from.

Looking at international comparisons our low tax burden is even more stark.

France and Germany have tax burdens of 48% and 44% respectively. They consequently can afford to fund their public services properly.

Virtually every country in Europe has a higher tax burden than us.

This is a quote from the Bruges group (right wing Tory MPs). Even they admit the UKs tax rate is low!

"the UK is quite competitive in Europe with a lower than average tax rate"

Over the last 35 years the tax burden has varied between 36% and 48% of GDP. So we are at historically and internationally low levels of tax.

We hear a lot about Labour tax rises, but here is where Labour have cut taxes;

Labour tax cuts for the individual since 1997.

Income Tax basic rate REDUCED to 22%
VAT on utility Bills REDUCED from 8% to 5%
A Couple with 2 children pay NO net tax until earnings reach £21,000
Pensioners between £1,500 and £2,000 better off

Labour tax cuts for business since 1997

Corporation Tax REDUCED to 30%
(USA 39%, Germany 40%, France 35%)

Small Business rate REDUCED from 23% to 0%

Labour have SUBSTANTIALLY REDUCED the increase in fuel duty.

(over 8 year periods)
TORY 1989-1997 17.7 to 40.3 (128% increase)
LABOUR 1997-2005 40.3 to 50.2 (25% increase)

DIESEL DUTY(Pence per litre)
TORY 1989-1997 17.3 to 40.3 (133% increase)
LABOUR 1997-2005 40.3 to 53.3 (32% increase)

Labour have even SUBSTANTIALLY REDUCED the increase in alcohol duty.

BEER DUTY (Pence per pint)
TORY 1989-1997 18.9 to 24.7 (31% increase)
LABOUR 1997-2005 24.7 to 27.9 (13% increase)

WINE DUTY (Pence per 75cl)
TORY 1989-1997 77 to 109 (42% increase)
LABOUR 1997-2005 109 to 123 (13% increase)

SPIRITS DUTY (Pence per 70cl)
TORY 1989-1997 442 to 548 (24% increase)
LABOUR 1997-2005 548 to 548 (NO increase)

IFS excise info

All this but what has happened to borrowing?

National Debt has been REDUCED from 44% of GDP to 32% of GDP.

We all know about this government's record spending on health, education and transport etc. Overall this seems a pretty remarkable record on tax for this government. But if we really want better public services we have to realise we have to pay for them and that means increased taxation.

If that is to happen, the Left need to persuade the public of the case for it. I specifically say 'the Left' rather than Labour because this has to be a grass roots level persuasion to remain credible, such is the damage the press have done to Labour's reputation (unjustified IMO especially on tax, as these figures show).


  1. Bang on Neil - The History of the Thatcher years has been re-written as a low tax halcyon paradise, often by people who weren't even alive.

  2. Urko, you are right. The massive unemployment levels, the costs of social disorder and the creation of additional bureaucracy in the form of QUANGOS meant tax take as a proportion of GDP was higher under Thatcher. On top of this, Thatcher moved the burden of taxation onto the poorest, to afford tax cuts for the richest.

  3. What is more wasteful, the billions people spend on alcohol, cigarettes, and burgers or the billions wasted on bureaucracy?

    So now you're a puritan as well? How does this mistrust of how people spend their own money on, for example, alcohol, square with your desire for longer opening hours? Shouldn't we, by your twisted authoritarian logic, ban pubs altogether?

  4. The point I was making as you well know, is a comparison between what our tax is spent on and what the individual spends their money on. Taxation is sometimes better spent. That is the point I was making.