Tuesday 3 October 2023

Truths about Tax





      At a time when our  public services are clearly and obviously crumbling (schools literally, housing inadequate and unaffordable, health services strained beyond the limit, councils going bust, transport systems clogged, courts with an unacceptable backlog, prisons overflowing with mental patients and fivers with sewage) it beggars belief that none of our major parties have the courage  to tell us that we, the electorate, if we want them to be made “fit for purpose,” are going to have to pay.

Alarmingly,  even mainstream Conservatives are seriously calling for tax CUTS before the next election.  Labour is paralysed with fear and has ruled out any  income tax rises or a wealth tax, and we Liberal Democrats have dropped our proposal, first introduced in the now distant days of Paddy Ashdown, for an extra  penny on income tax for education.

All the  parties peddle the “something for nothing” concept that all our desires can be financed absolutely free through growth of the economy.

 Even if it were possible to produce enough sustainable growth  that wouldn’t further fry the planet and exhaust its non-renewable resources, such growth would take years, and the need, for schools, medical care, homes fit to live in and air fit to breath, is now.

The Tories hammer away at the fact that the UK’s tax take is at a 70 year high.  What they do  not say is that our tax take, compared with similar countries, is average to low (and most of the similar countries do not have 13 years of neglect to catch up on.)

Figures from the impartial OBR, for the most recent year available  (2021) show the UK’s percentage of GDP taken in tax  is 33.5%.  This is 3.3% BELOW  the G7 average, and 6.4% BELOW the average for the EU14 (similarly advanced developed countries).

So why have our political parties painted themselves into corners by promising not to raise taxes, and in one case to impoverish our public services even further by lowering them?

 It is surely time to stop pretending, treat the electorate as adults, and tell the truth 

 1. Stop calling taxation a “burden”: it  is the subscription we pay for the privilege of membership of a civilised and decently functioning society.

2.    2. If we want our society to come up to scratch and actually function decently we have to be prepared to pay.

Given that the UK’s tax system, like Topsy,  has “just growed” in a haphazard  manner and subject to many eye-catching wheezes designed to encourage voters to support the government  of the time there is need for a root and branch reform of the system designed to promote fairness and, in particular, to engineer a shift from taxing “goods” such as employment  to “bads” such as pollution, unnecessary use of non-renewable resources and rentiers.

The progressive parties should advocate a Royal Commission or similar to consider and propose systemic reform.

In the meantime, a Professor Richard Murphy has identified a list of some 30 “reforms” which the parties have no yet ruled out, but could raise up to £50bn a year. They include:

·       Restricting tax relief on pension to the standard rate:

·       Subjecting landlords to NICs

·       Subjecting financial services to paying VAT.

On my personal list I would subject rising house  prices to CGT, place a Tobin-type tax on all financial transactions, and that old Liberal favourite, introduce site value rating on land.

 An article in today’s Guardian* by a Dr Prabhaker of the Open University suggests some interesting ways of raising revenue by curtailing or amending some of the many exemptions from taxation which have been introduced over the years.

 The need is to put behind us boosterish boasts about “World-leading Britain” and bring our public services, and our tax take to pay for them, up to average.




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