AND ANOTHER THING
Taxes and the Labour death-wish
PAUL JOHNSON
Labour seems fated to lose the coming election, as it has lost the last three — indeed it has won only two decisive victo- ries, in 1945 and 1966, in the 18 elections since it became the main challenger to the Conservatives. The reason for its poor record is the structural nature of the party itself, which obliges it to formulate and adopt policies which few people like, and many people hate. Neil Kinnock's 'reforms' have lopped off some of the more ridicu- lous policies but he has not changed the policy-making mechanism which is the real cause of the party's misfortunes.
What will do down Labour this time is tax. People do not like paying taxes. They never have done, in any country, in the whole of history. It is true that, around mid-century, in many advanced countries, there arose a somewhat masochistic belief among the educated middle class that it was 'right' to pay high direct taxes to give the 'less fortunate' the welfare state they needed. But this mood has long since passed, even in countries like Sweden and Denmark, where it was most deeply rooted. And it has never been shared by the work- ing class, which regards tax-avoidance, where safe, as a duty you owe your family. The reason the mood has passed is that everyone now knows that the state gives poor value for money. Among the very few people who do not share this view are Labour activists and those they send to par- liament.
Most people are resigned to supporting central government and (more reluctantly) local government, which in some cases can- not even do simple things like collect the rubbish. But they have, I think, a clear idea of the total amount it is reasonable to deduct from their incomes for these pur- poses. It is about a quarter. Once a govern- ment or party starts to extract more, or threatens to do so, they begin to resist and feel morally justified in doing so. They may just not pay, like many poll-tax dodgers, or vanish from the records. They may con- struct, with their accountants, any one of thousands of tax-avoidance schemes open to them. Or they may go abroad, taking their capital with them, something it is infinitely easier to do now than it was in 1979. One cannot get it into the heads of people like Neil Kinnock or Roy Hattersley that for the really rich — the people they most want to hit — income tax is voluntary. Contrary to what Hattersley believes, rich people do not hate the poor or wish to rob the sick or turn away the homeless. They are just as willing to pay up as anyone else if they think the amount demanded is rea- sonable. Beyond a certain point, however, they become obstinate, and then the state gets nothing from them.
Labour's tax proposals are ridiculous and dishonest. Most of those who are already good at their calling already pay at the top rate of two-fifths of their earnings, well over the 'acceptable' quarter-mark. Labour proposes to increase this by 10 per cent, so they will have to pay half. It further propos- es to turn the National Insurance premium into a direct, progressive income tax, adding another 9 per cent. That means the target-group will now be paying 59 per cent of their earnings in direct tax. This group are also the savers, especially since the lower rates during the Thatcher years enabled them to save out of taxed income. If they put money by, instead of splurging it, and so provide funds for the investment Labour says the country desperately needs, and have thus acquired a savings income over £3,000, they will have to pay an addi- tional 9 per cent on top of all the rest. That means Labour's total take out of the incomes of the abler, more energetic and provident people will rise to 68 per cent, more than two-thirds. Of course many of them, perhaps most, will not pay it. They will, as it were, vamoose in one of a number of ways open to them, and the net result may be that tax revenue from large cate- gories of people, far from rising, will actual- ly fall. There is evidence from many coun- tries that this is what happens, just as a lighter tax regime tends to increase the take. Labour may soon find, in fact, that in order to raise the revenue they budget for,
to the 'He doesn't talk. He used to belong Maxwell?. they will have to hit everyone, or at least the bulk of the working class. So we will be back to a standard rate of 30p, higher VAT — the lot.
Now why does Labour want all this extra money — nearly £40 billion by the latest count? Because it is a party geared to pro- ducing programmes. It often calls itself, together with the unions, the 'movement', 'this great movement of ours'. But it never moves anywhere. It just sits down and drafts things. It is a draftment. Constituen- cy branches, union branches, delegate con- ferences, union conferences spend most of their times drafting resolutions about poli- cies. That is what they are for. They are composed of people who believe they should be running governments, and who think they can construct utopias out of their heads. They all have sets of policies, thousands of them. These countless drafts and policy resolutions are sent up to party conference, debated, passed and so move into the great ideological sausage-machine which produces strings of Labour 'commit- ments'. Since the last election alone, Labour has churned out millions of words of policy documents. And most policies, by their nature, cost money. So Labour always lumbers itself with an endless shopping list of social goodies it is committed to buy, and that means raising taxes. It is the nature of the beast and Kinnock has changed nothing in this respect.
In the nine decades of its existence, Labour has yet to learn the elementary political fact that oppositions do not win elections with their policies. It is govern- ments which lose them through their per- formance. A Tory government has been in power for more than a dozen years and its mistakes, in the last two or three, have been legion. It looks tired and shop-worn and accident-prone. It ought to be on the ropes with Labour pounding away: take that for the poll-tax, that for the mortgage rate, that for lost jobs and bankrtiptcies. Instead, the whole debate has shifted to Labour's policies and the tax-torture need- ed to pay for them. At a time when every- one is feeling the pinch and the only people who are flourishing are bailiffs, receivers and people who give you advice on how to be a tightwad, Labour is saying: 'Open up your wallets, friends, we wish to lighten them.' By staying in the policy business, the comrades are stuck in the suicide-note business too.
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