13 October 2007

Cowardice on tax and Europe will not win us the next election.

When Ken Livingstone said Gordon Brown was to the right of Tony Blair, few took it seriously, now few of us (on the left) are laughing.

Without even having an argument, the Labour party has given in to the ideas of the extreme right. There is a fantastic discussion to be had on tax and Europe, and Labour could win the argument...if only we tried. In the face of the Tory press, it wouldn't be easy, but because basically we would be arguing for the truth...and surely, surely? even today that has to be an advantage, we could win the argument.

Opposition to inheritance tax has not come about overnight, nor has it happened by accident. It is the result of a...
sustained media campaign that started with the right-wing media in the US (and IHT abolition by Bush) and inevitably was replicated by the Express, Mail et al over here.

For many years now (surely forever?), day after day, the Tory press has relentlessly battered the EU and tax (amongst other things) with distorted stories that are never countered by the Labour party. These myths are now so pervasive that the very idea that either tax or the EU could be useful and beneficial is viewed with disdain even by bedrock Labour supporters.

To counter this and change attitudes will take a relentless campaign by the Labour government sustained right through to the next election. Gordon Brown does best and rides high in the opinion polls when he sets the agenda and argues for progressive policies not caves in to the Tories. There are plenty of possibilities to set the agenda with and put the Tories on the backfoot. There are few votes for Labour in apeing Tory policies. Labour have to let people know exactly what their aims are and how they intend to achieve them. People want to see less inequality, people want better public services and they are willing to pay for them if they can see the results. These are all Labour aspirations (or should be!) and give Labour an advantage over the Tories who only represent the privileged few.

The Tory press have persuaded people that taxation equals waste and that public services have got worse despite extra spending. This is far from the truth. As the argument over IHT shows, Labour have to counter these claims in the strongest terms if they are to win the argument. Having the truth on your side is sometimes not enough - you have to make the case as well.

It is indisputable that IHT causes less hardship than the council tax and even VAT (where is the hardship in inheriting assets of over £350k and only having to take a £20k mortgage to pay the taxes? Even someone on the dole could get a mortgage like that with those assets) yet instead of VAT and council tax (that hit the poorest the most) being reduced, we get reductions for the richest by cutting IHT. This is a terrible injustice and immoral when the top 50% already have 94% of the wealth. If even the Labour party do this, what hope have the poor got? Never has the dysfunctionality of our electoral system being made more clear than when the parties have to pay more attention to big house owners in the marginals than to the relative poverty of the majority. As Irwin Stelzer argued, if the wealthy and middle earners are honest (and stop whinging for just a second), they have done very well out of this Labour government (unfortunately the low earners have not quite done so well).

As for waste, as a percentage of public spending it is probably little different to when the Tories were in power (compare the growth in NHS admissions, doctors and nurses pay (we wanted them paid more didn't we? to the growth in NHS administrators, and you would still have auditors like this that were installed by the Tories but the Tories would reverse the FOI Act so you wouldn't hear about them), and when asked, most people have good stories about public services, especially the so derided NHS. We still spend far less than countries in Europe on our public services and this is the main cause of our problems, not a lack of efficiency (though of course, efficiency savings are always desirable).


  1. Sure, IHT is f***ing great in terms of redistribution. It raises about £3bn, roughly the same as the TV licence fee (which is a totally unfair poll tax). So in theory, we could double IHT to 80% and scrap the TV licence fee. D'you think that would make the UK such a nicer place to live in?

  2. Where is your evidence that VAT and council tax hit the poorest most? As I understand it, people on benefits can claim council tax benefit to exclude them from paying! VAT is only charged on non-essential items such as alcohol, tobacco, fast food etc. Essential items like food, books and children's clothes are exempt. VAT on fuel is essential to focus people's minds on reducing energy usage to save the environment or shouldn't the poor be concerned about that!!

    Do the poorest in society get better value for money from council tax than the rich!?!

  3. Mark, the TV license is not a tax and therefore not something that is relevant to this discussion.

    I think we need a variety of taxes, and IHT is one that has been accepted (in various forms) around the world for a long time. From a socialist and meritocratic point of view I can see the attraction of 100% IHT. There may be practical problems with this but from a theoretical point of view it is highly justifiable. Why should wealth be preserved through generations?

  4. Snafu, All indirect or (spending) taxes are regressive in comparison to taxes on income because the poor spend a higher percentage of their income.

    Yes the exemptions on food, books and children's clothes help the poor, but still the majority of their income is hit by VAT unlike the wealthy who have more savings, asset earnings.

    Most of the poor are low earners. Low earners cannot claim council tax benefit. Being basically a flat rate tax, council tax is an even more regressive spending tax than VAT.

    You are right that environmental taxes on fuel, pollution are needed and they would be regressive. I think this emphasises the need for a citizen's income to re-balance tax regressiveness. A citizen's income would allow us to move away from taxing things we want to encourage (like income, saving etc) and on to things we want to discourage (like energy usage, pollution etc), and allow us to do this without hitting the poorest the most.

    I think that rich people do get better public services. Rich educated people are better at claiming benefits and avoiding taxation, the better schools and hospitals tend to be in rural areas where rich people live, and it is arguable that refuse collection, bus services, and police etc are more expensive to provide to areas where rich people live (and are more responsive).

  5. Hilary Wade15/10/07 3:22 pm

    There's a family story about a very rich, elderly bachelor (in Bradford) who summoned his relations to his death bed in the first years of the last century. "See this hand, lad? That's dropsy. I'll not recover from that." He then instructed them to extract a large iron cash box full of banknotes from under his bed, & gave details of how it was to be divided among the family members. "Not a word to t' Revenue mind."

    As far as I know this is a true story. If IHT was raised to 100%, I expect scenes like this would become commonplace, understandably so.

  6. Hilary: I agree that 100% IHT is impractical (as much as I would like to see it), but 40% is practical and I think raising the threshold is an immoral act when we have such inequality in our society. Lowering IHT is a symbol of how the growing wealth inequality over the last few decades has much more to do with privilege than merit. It is a very sad sign of the times.

  7. Neil, perhaps we should also make it illegal for parents to teach their children anything as it's not fair that middle and upper class children do not solely rely upon the state education system to be educated but might be coached by their parents too.

    This means that a good education can be passed across the generations and thereby disadvantages certain children!

    Neil, savings are worthless unless they are spent on something when 17.5% will be given to the Government. More savings also means more income tax on those savings too!

    I suspect low earners are only "hit" with council tax as so many people on benefits (and students) are exempt from council tax!

    Which rich people get better public services? How many use private healthcare and private schools!?! How many claim benefits? Maybe they should really be due a refund!

    The left only has themselves to blame if society is less meritocratic now than a couple of years agoi - simply because they totally oppose grammar schools in every town! Of course, this is good news for those middle class parents whose children are privately educated as there will be less competition from working class children who have studied hard and are competing with their own children for jobs in the future!

    PS Any monies paid to the state on threat of prosecution and imprisonment are taxes to me, prescriptions, fines, tuition fees and TV licences!

  8. Snafu, the TV license is not paid to the state, so even on your rules it cannot be a tax.

    It is in societies interests that opportunity is spread as wide as possible, do you agree? There is little we can do about the educational disadvantage of having uneducated parents, but we can do something about financial inequality.

    Class war is alive and well. The rich are massively outnumbered, but they control the media that persuade people that 'middle income' is £50k to £100k with £500k+ in assets. When in reality £50k+ earners are less than 6% of the population. We are also still trying to escape an 18th Century electoral system bequeathed to us by the rich, who use it to discriminate against the poorest voters.

    Finally, if you really are worried about the number of people on benefits and their cost to society, you won't want a return of the Tories. Not only are there many more students (still less than our competitor countries), there is a much bigger percentage of the working age population working now than under them.

  9. Hilary Wade16/10/07 9:43 am

    Well, even with inheritance tax at its current levels, it's possible that scenes like this might actually still go on in Bradford - not perhaps with banknotes, but conceivably with gold. Gold bangles are apparently used as a form of portable specie in places like Southall. And I've met Indian girls whose mothers have trained them to assess the purity of a piece of jewellery to within a single carat, as a useful and transferable life skill.

    Speaking personally, if IHT went up enough, I should probably seek to remortgage my flat to the absolute hilt, and convert the proceeds into something less traceable. Then, when I died, the value of my estate would be zero, at most, as the mortgagees in possession sought to recoup the value of their loan by putting the property on the open market - where it could be bought, if they liked, by the people who knew where the gold or whatever was hidden. I'd do this soon, too, because I reckon that, in short order, mortgages (and other finance too) would become near impossible to raise, as anyone with half a brain sought to die bankrupt, and IHT dwindled to a tax on the unsophisticated. Meanwhile the price of gold, icons, rare stamps etc would probably rocket. None of this would do the economy any good. I don't imagine that these are the sort of social engineering effects that people want when they advocate raising IHT, but I expect that in real life, they are what would happen.

  10. Neil, Parliament determines the cost of the TV licence. Does Parliament directly set the cost of a price of baked beans at Tesco? Everyone with a TV has to have a TV licence regardless of whether they watch BBC1, BBC2 or every channel but those!

    Which part of the above is not a tax!?!

    Neil, keeping a load of morons in school until they are 18 or having a goal of 50% of all school leavers go to University are a waste of taxpayers money.

    I see no benefit in increasing the number of non-wealth creating public sector non-jobs in quangos etc when the UK has an expected budget deficit of £36bn this year!