Jeremy Hunt talks about having to make decisions of “eye-watering difficulty”. The assumption is that he is talking of yet more cuts to our beleaguered public sector, but I have another suggestion. Why not put 2p on the basic rate of income tax?
Taking it up to 22% would raise about £10bn a year and thus, while it may not be the entire solution to our current difficulties, it would greatly relieve the pressure for cuts to essential services, some of which are already in a dire state.
No doubt such a move would trigger an outcry from those on the right who spend their waking hours demanding ever greater tax cuts, but in the circumstances they can be safely ignored. There will be those on the left who will also throw up their hands in horror, but these will be the same people who are also vehemently opposed to cuts of almost any sort and that is not credible either.
This is crunch time. For years the British public has been led by politicians of all parties to believe it can enjoy north European levels of public services and American levels of taxation, and the truth is we can’t. A choice has to be made.
There will be those who suggest that our deficit can be paid for simply by increasing taxes on the rich, but merely increasing the top rate of income tax will not begin to raise the sums required and it is misleading to pretend otherwise. It is the ever falling basic rate that is the problem. In his final budget as chancellor, Gordon Brown – trying to play the Tories at their own game – slashed 2p from the basic rate of income tax in return for a round of applause that had faded within 24 hours. I thought at the time it was madness and so it has proved, although in fairness the economy then was in much better shape than it is now.
Although an increase in the basic rate of tax would impose an additional cost for lower earners, they are also overwhelmingly the beneficiaries of the public services they are being asked to help fund. And before anyone starts declaiming about the wickedness of any increase in the basic rate, we might recall that when Margaret Thatcher left office in 1990, after 11 years in power, the basic rate was 25% in the pound. As recently as 2007 it was 22p.
This is a moment of truth for the Labour party, too. After 12 years out of office, the habit of opposition is deeply ingrained. On the one hand, opposition spokespeople lament the destruction of our public services, but they keep quiet about the tax implications. Were Hunt to increase the basic rate of income tax, the odds are that Labour MPs would be leaping up and down about the wickedness of it all. That is not credible. If Labour is serious about power, it can’t just sit back and shout yah boo. It needs to start making the case for fair taxation.
The argument is not difficult. Tax, fairly raised and wisely spent, is the subscription we pay for living in civilisation. It is the reason why we don’t have families living on the streets and why the sick, the unlucky and (yes) even the feckless are not left to starve.
We are told that our government now raises more in tax than at any time since the Attlee government in the late 1940s. There is good reason for that. Public expectations of government are much greater today than they were in Attlee’s time. When Covid struck, the public rightly expected the government to spend whatever it took to treat the sick and preserve the social fabric.
Likewise, when escalating oil prices threaten destitution for many, most people expect the government to mitigate the merciless demands of the market. What one cannot do in these circumstances is simultaneously demand tax cuts. Everyone except the most demented ideologues understands that. And, by the way, contrary to what we are sometimes led to believe, the UK is near the bottom of the G7 and EU tax league tables.
I was once contacted by a constituent who worked on an oil rig off the west coast of Africa. Although his wife and children no doubt enjoyed the benefits of our public services, he was indignant at the prospect that the exemption from income tax he enjoyed while working offshore was under threat from some amendment the Treasury was making to the tax rules. I replied that if he would care to get off his oil rig and visit nearby countries – Nigeria and the Democratic Republic of the Congo came to mind – he could see for himself what life was like in countries where little or no tax was raised, and where such tax as was raised is often grievously misspent. No doubt I lost his vote, but it seemed a price worth paying for acquainting him with reality.
Come the election, I predict that the Tories will once again pose as the party of low taxes. It has worked well for them in the past – even though they have sometimes done the opposite once in office. This time round, however, only the gullible are likely to fall for it. There never was a better time to make an argument for properly funded public services. Labour should not hesitate.
Chris Mullin was Labour MP for Sunderland South from 1987 to 2010 and a minister in the Blair government
