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Challenge the anti-tax lobby

This article was first published by Compass, 2 December 2008

Just when we were getting excited by New Mandelson - saving the Post Office and swapping boardroom for ballroom - Old Mandelson returned. "It is the times that have changed, not New Labour," he told an Institute of Directors dinner on 26 November. "The New Labour principle still stands: we will only tax out of need, not out of envy or spite."

As David Byrne and Sally Ruane showed in a recent Compass Thinkpiece, the poorest 10% have every reason to feel envious. When you take into account the total tax burden rather than just income tax, they pay a higher rate than anyone else.

And what of taxing "out of need"? Some might say need includes increasing health and social care spending at a time of rising demand. But Mandy made it clear that by need he meant financial crisis. He told the Guardian's Martin Kettle a few days later: "It was purely a pragmatic question of how we would repay the borrowing."

Perhaps Mandelson is being disingenuous. Labour did, after all, do the right thing - focussing tax cuts on poor to middle-income earners and taxes rises on the rich. But doing the right thing in one instance is not enough. Labour needs a narrative to explain what it is doing and why, and which breaks with Thatcherite first principles that low tax and private provision are necessarily good. The alternative is a scramble to boast who can tax the lowest - one that for Labour ended in the debacle of the 10p tax band abolition, in which Britain's poorest taxpayers were asked to subsidise tax cuts for everyone else.

Martin Kettle was thus right to be wary: "There has always been a powerful case in favour of a simpler, more progressive tax system. But that is not the case that Labour or Brown have made at any time since 1994. Now they say that exceptional times demand exceptional measures. This talking up of the crisis almost certainly spreads more panic than security in the end. The 45% announcement therefore gives Labour all of the political pain of tax-raising in hard times and little of the gain."

Such a narrative must start by challenging the simplistic and corrosive claims of anti-tax groups like the Adam Smith Institute and its younger upstart cousin, the TaxPayers' Alliance. The TPA, which claims to be a "grassroots alliance" of "ordinary taxpayers", is rarely out of the headlines - it boasts an average hit rate of 13 media appearances a day and puts the links on its website to prove it. Of course this isn't an alliance of ordinary taxpayers at all - it's an alliance of right-wing ideologues, whose mission is to "oppose all tax rises". Its academic advisory council includes Adam Smith Institute founders Eamonn Butler and Marsden Pirie, Thatcherite academics Patrick Minford and Kenneth Minogue, and Maggie's former economic advisor Sir Alan Walters.

In James Harkin's words, "the Taxpayers' Alliance is yet another lobbying organisation that represents us without taking the trouble to ask for our consent". It does claim an impressive 20,000 supporters - although the fact that you can register for free online suggests that this constitutes a mailing list rather than a membership. Certainly a number of left-leaning bloggers report signing up to receive updates, as has my two-year-old daughter.

The TPA doesn't just help generate the "now"-prefixed headlines beloved by the Mail and Express ("Now top earners could pay 60p in tax for every £1 they make", "Now police give out flip-flop to women drunks", to give two recent examples). It gets considerable local media attention, as well as airtime from the BBC and other broadcasters. Even the Spectator complained: "It is so one-sided that one almost yearns for some opposition on the subject. Apart from Dame Polly [Toynbee], is no one out there prepared to challenge the Taxpayers’ Alliance and defend public spending? ... The achievement of the Taxpayers’ Alliance is to make one word synonymous with tax: waste."

In making the case for fairer rather than lower taxation - and defending the role of the public sphere - this issue of waste needs to be taken head-on. The TPA plays on real concerns which New Labour has failed to allay. The Millennium Dome - overseen by Peter Mandelson - remains an early icon of profligacy, overshadowing important increases in health and education spending. The refusal now to reconsider ID cards and Trident renewal in the face of recession will help fuel the cynicism.

Some of the Government's most wasteful spending has resulted from its infatuation with the private sector. High-profile recipients of such spending notably include TPA supporters such as Malcolm McAlpine, Director of private finance initiative provider Sir Robert McAlpine, and Sir Tom Cowie, Life President of Arriva, the train operator whose poor punctuality seems to grow in proportion to its subsidies.

While mainstream media have largely reported TPA claims uncritically, it has been left to bloggers such as Tom P at Labour and Capital to probe more deeply, challenging, for example, TPA research into council pensions. In a thoughtful post he argues for a "Real Taxpayers' Alliance" - an "organisation that looks at government expenditure and projects but without the ideological baggage and inherent antipathy towards the public sector as a whole".

It's here that things could get interesting. Some of this thinking has already been going on - see, for example, the TUC Touchstone pamphlet, Rethinking Public Service Reform. (The Touchstone series includes two other excellent pamphlets relating to fair tax: Do the Super-Rich Matter? and The Missing Billions.) Other organisations, including Compass, are exploring fruitful areas such as co-production, whereby users and staff work together to redesign services. Here, the free-market right, tied to dogmas that have already been assaulted by the financial crisis, has nothing to offer.

But some anti-tax lobby myths require a less measured response. One is Tax Freedom Day, promoted in the UK by the Adam Smith Institute, although enjoying global reach. It's a brilliant marketing ploy and a supremely dumb concept: "the day on which we stop working for the Chancellor and start working for ourselves". Tax Freedom Day relies on the notion that only the cash in your pocket is yours (assuming, presumably, that your bank hasn't folded), and that any benefits you get from the state - trivial things like health care, education, policing and infrastructure - represent money you've been cheated out of. Fortunately for the Adam Smith Institute there is a real-world example of a state where every day is Tax Freedom Day: Somalia.

Posted by Other TPA at 01:52pm on 2 December 2008
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