Let’s imagine this. The prime minister and the chancellor are men of good intent who want to do their best for Britain in hard times: they promise brave and unpopular decisions. Privately they know how much their party is to blame. But they use this last chance to leave a better legacy.
These realists can read political runes as well as spreadsheets, so they see their chance of winning the next election is not far from zero. Freed from fear of defeat, they decide to seize this rare two-year chance to correct longstanding toxic issues ducked by all parties fearing electoral retribution. Yes, it’s only a thought experiment, but let’s imagine just a few reforms that are long overdue, left undone through all parties’ political cowardice.
First decision: when in a “black hole”, stop digging. Stop pretending austerity strychnine is medicine. George Osborne imposed what Paul Johnson, the director of the Institute for Fiscal Studies, tells me was “the most dramatic period of spending cuts in history”, when the UK fell behind all similar countries in growth. Markets will welcome tax rises and permit abandoning more austerity poison. The CBI’s director-general, Tony Danker, calls for investment instead: repair, build and multiply renewables, instead of “doomsday” cuts into a recession causing investment “hibernation”. Borrowing to invest is the orthodoxy, backed by the former permanent secretary to the Treasury Nicholas Macpherson, who writes “the UK has underinvested” over the years, with the Treasury to blame.
We could use this crisis creatively for urgent tax reforms: every MP knows council tax is a disgrace, but no party dare revalue properties still fixed at 1991 prices. The capped top rate means millionaires in mansions pay only three times the humblest flat. Levelling up needs to rebalance overtaxed cheap homes in the north and undertaxed south-east and London properties. Bring in a land valuation tax to let councils capture the value added by their planning decisions, instead of giving it to developers. That could help cover the miserable dilapidations in our public realm.
The tax system, meanwhile, ignores the gathering speed of wealth accumulation. A one-off “black hole” filler, taxing 5% of wealth that’s worth more than £2m over five years, would bring in £80bn, according to Arun Advani, a fellow at the London School of Economics’ International Inequalities Institute. Tories are by nature scared of their donors, while Labour is too shy of “the politics of envy”. So do it now.
Rachel Reeves, the shadow chancellor, has an array of tax loopholes that she is ready to abolish. Labour should also promise to equalise capital gains and income tax, so rentiers pay the same rates as those who work for a living (as was the case under the Conservative chancellor Nigel Lawson). It’s time for a national insurance contribution from rent, pensions and all income, which otherwise is unjustly imposed only on working people.
Stand back and consider what matters most for the future, if we are to have one. The climate crisis and children’s lives take first place. The tax system traditionally discourages bad consumption – alcohol or tobacco – but MPs dare not tax the worst: carbon emissions. To reach net zero, everyone should be taxed according to their driving, flying and heating emissions. But fuel taxes are frozen, with flying taxed less than driving, while domestic energy attracts only 5% VAT. The promise of “honesty” by the chancellor, Jeremy Hunt, is empty without a carbon tax to make us use less.
One excuse for not raising consumption taxes is “what about the poorest?”, in this most unequal country in the EU, bar Bulgaria. The answer is to raise pay and universal credit, abolishing the punitive two-child limit, benefit cap and bedroom tax. The shocking increase in hungry children should touch consciences: Hunt told Laura Kuenssberg that we were a “compassionate country”, but his party cut benefits in real terms in seven of the past 10 years. Now he needs to explain how low benefits in Britain (relative to other comparable countries) cause worsening poverty, which drags on productivity.
Pensioners, not children, come first in this backward-looking country, when the progress of the young should be the key measure of national success. What if schools, colleges, sports, arts and youth centres flourished along with fine parks and playgrounds, instead of facing closures and cuts? Spending per pupil in England has fallen by more than £1,000 since 2010; it’s the opposite picture in private schools, which have seen a boost over the same period.
Let’s imagine wildly: free of fear of its party (it would need opposition votes), the Tory government could reform the rotten electoral system and abolish political donations. It could reduce crime by reforming the drug laws that make gangsters rich, saving the lives of teenagers caught up in county lines gangs. It could repair EU trade, make friends across the Channel … add your own ways to rescue Britain here.
All of this is an imaginary reminder of how democracy is badly served by politicians pandering to prejudices peddled by a disproportionately rightwing press, failing to use their powers of persuasion to do what most probably know is right. Tax rises this week are overdue – to stop pretending we can have Swedish services on US taxes. Faster-growing European countries pay and invest more.
Alas, back in the real world, old priorities remain. The Sun is told Rishi Sunak and Hunt are storing a £7bn war chest to splurge on voters before the next election. The NHS will be “protected”, Hunt claims. But Julian Kelly, the NHS finance director and an ex-Treasury director-general of public spending, says that just to stand still, it needs exactly that same sum – that £7bn. If it gets any less on Thursday, you will know it has been hidden for a forlorn bid to avoid election doom.
Polly Toynbee is a Guardian columnist
• The caption and main text of this article were amended on 15 November 2022 to correct two pedalled/peddled homophones.
