POLITICS
The ticklish tactics of tax attacks
NOEL MALCOLM
The idea of moving suddenly from mid-term blues to election fever is a worrying prospect for the Government, and ought to worry the Opposition almost as much. With 18 months — or even two years — still to go, the public simply does not have the stamina for it.
The row over Labour's tax plans during the last two weeks has presented a strange spectacle. On the Tory side there is some- thing of a hectic flush on this issue, a concentration on it to the exclusion of most of the other things in the Labour propos- als, which cannot be healthy. The two Conservative backbenchers who dutifully laid questions about this topic at their mistress's feet in Parliament on Tuesday both showed an unconvincing determina- tion to look triumphant. If this is indeed the key issue of the coming campaign, then there is a real risk that it will become jaded a year or so too soon.
The problem with the Labour side of this argument, however, is more complicated. It is not that the Labour Party lacks any line of defence here, but rather that the various denials, justifications and counter- attacks which it has launched since the appearance of its policy document point in too many different directions at once. Some of the divisions and contradictions between them will become more obvious as time goes on.
The most basic division of all is between those who think taxation is a necessary evil and those who assume that it is really rather a Good Thing. Dr Jack Cunning- ham, the co-ordinator of Labour's cam- paign, seems to think that taxes are a bad thing — or at least that the public must think so. He told a press Conference that there was 'no question of a Labour govern- ment coming in to raise taxes immediately, not for anyone, let alone for the majority of people'. Margaret Beckett, the shadow Chief Secretary to the Treasury, seems to think that taxation is a terrible scourge to inflict on anyone: in a paper issued last week, entitled 'Conservatives Cost You More', she accuses the Thatcher govern- ment of raising the level of taxation on the average family over the last 11 years by roughly £300. By the time you have finished reading her paper, the idea that Mrs Beckett could possibly wish to raise taxes any higher herself seems positively blush-worthy, like an improper suggestion.
And yet the suggestion must be made, and the reasons for making it are not only to be found in the hugely open-ended spending pledges of the Labour policy document. The document, and much of Labour's public rhetoric at present, also imply that taxation is rather a good thing after all.
The oldest argument in favour of taxa- tion is that it redistributes wealth from the rich to the poor. You will not come across the word 'redistribution' in the new-look Labour policy statement, but the idea is still there, masquerading under the adjec- tives 'fair' and 'progressive'. 'In a fair tax system', it says, 'contributions are based on ability to pay. This progressive principle is a common feature of tax systems through- out the world . . .' It then goes on to criticise the Conservatives' abolition of all but one of the higher bands of income tax. Now, the only system strictly related to 'ability to pay' would be one with a single percentage rate for all citizens, levied on all their income. That way, the more they earned, the more they would pay. Any system with even one higher band is not just progressive, it is progressively progres- sive: it is based, therefore, not on ability to pay, but on the government's ability to squeeze the rich more than it squeezes the poor. There are only two possible justifica- tions for this arrangement: one is ex- pediency (which is historically the true explanation), and the other is redistribu- tion. If Labour spokesmen talked only of the need to raise tax revenues, the former explanation might be left to do all the work; when they go on and on about fairness instead, the latter explanation peeps out through its disguises.
But the warm glow of approval for higher taxation does not arise only from the urge to redistribute. Almost any day .of the week you can switch on your radio or Now the rail link might be abandoned, maybe Mr Parkinson would like to buy our house.' television and hear Labour spokesmen arguing from the Wilsonian principle (A.N. rather than Harold) that we should all be spending more money on public services and the 'infrastructure'. This is an argument of great popular appeal: every- one sitting in a traffic jam on the Ml, for example, will agree that the Government ought to spend more of his money subsidis- ing the railways, so that other drivers (not he, of course) would be persuaded to travel by train. The most recent opinion poll produced a figure of 64 per cent approval for this argument for higher taxation. Unfortunately, the poll also asked those who agreed with the argument how much extra they would be prepared to pay: 55 per cent did not know, and 34 per cent suggested something between £1 and £5 a week. If their proposals were applied to all tax-payers, that would yield (roughly) be- tween £1 billion and f5 billion per annum: hardly enough to cover the extra £50 billion of spending which one recent analy- sis (by Midland Montagu) has found lurk- ing in the Labour policy document.
Yet the Wilsonian enthusiast for higher taxation will be doubly disappointed by the Labour proposals. First because they do not actually promise higher taxes for every- one, or even for most people. And second- ly because they hive off all the most worthy forms of public expenditure into a category called 'public investment'. This category, they say, can be paid for not out of taxation but out of borrowing: 'that is what any sensible business does'. So those altruists on the M1 are reaching into their pockets, it seems, in vain.
The category of public investment is immensely ill-defined; the only definition offered by Labour is that it is the sort of spending which 'will bear fruit in the long term'. So long as this huge and vague escape clause exists, any attempt by the Tories to translate Labour spending plans into Labour taxation plans must remain inconclusive. The real battle will be to prove that Labour's management of the economy will be incapable of delivering the long-term growth on which all its borrow- ing plans rely. Economic policy is the cake, and threats of tax increases merely the icing on it. Those Tory strategists who concentrate on tax issues at this stage of the campaign are like children at a tea party, gobbling the icing and the cherries when the meal has hardly begun.
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