The tax shift

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Despite being the late entrant, Chris Huhne has already been more successful than any other candidate in this race in terms of shifting the debate onto both policy in general and his agenda in particular. As has been mentioned elsewhere, he was the only one on Saturday who made a point of talking about the need for the party to improve its Parliamentary Gender Balance; now they’re all talking about it.

He has also brought with him not just environmental rhetoric but environmental policies. Ming announced his top three priorities on Friday as being “the environment, the environment and the environment” yet thus far has been rather sketchy on details. Chris on the other hand has been quite clear: he wants to see a radical tax shift off income and onto resource taxation.

The party has been paying lip service to this idea since at least 1998 and Paddy Ashown’s post-97 policy review yet has always been forced into the background as the front bench has competed with itself in what clever income tax policies it can come up with next. So we had the penny-in-the-pound. So we have local income tax and the 50p rate. Over the past few years I have grown increasingly desperate over this, unable to see how it makes any economic sense whatsoever. Finally, someone is prepared to use his time in the media spotlight to put a contrary view and I am delighted.

Not so some of my fellow bloggers. Militant Ken feels that we shouldn’t be calling for a tax shift at all, but instead should plough the money we raise into environmental schemes. Missionary Iain on the other hand feels that Huhne is being, to use a Sir Humphreyism, “courageous”. I’m delighted we are finally having this debate, and respectfully disagree.

With regard to Ken’s argument I will simply say this: no-one is saying we shouldn’t invest in environmental schemes. But what we are saying is that the overall level of tax should not be raised. To go into the next election saying otherwise would truly be suicide, especially since we would be raising revenue through what are often caricatured as “stealth taxes”. But fundamentally, what this policy is saying is that individuals should be entitled to keep more of a proportion of their income. In return, when they use a service, they should have to pay more in terms of its environmental externalities.

In a lot of cases it isn’t a matter of taking the car or taking the bus; it is a case of using the car less. Reduction should be our priority, not encouraging greener alternatives to current levels of consumption.

There’s also only so much we can do with subsidies. The rail industry receives more state aid than it ever did before privatisation, yet every time that money is increased, costs simply go up and we are back where we started. That is the perversity of using public money to shore up unpopular services.

Surely, and I’m not suggesting there isn’t a balance to be struck, but it would be better for people to use their own money to choose whatever service suits them, even if it costs a bit more, than for the state to choose what service is best for them and then subsidise it (God I sound very Reform there – I should add that I’m talking about things like transport here not health!)?

Iain worries, if I may paraphrase, if this isn’t too much too fast. Where I would concur is that we would have to come up with some kind of safety net – some way of ensuring that the poorest in society can still adequately pay for heat and light. Beyond that though, I think it is a strong message. Raising personal allowance in the way Huhne suggests would lead to a big net increase for most wage-earners and I think they would respond well to the idea of being able to take more personal responsibility over both their own lives and their own environment.

The messages will be absolutely vital here, but I think we are helped by Cameron wanting to shift onto this ground. My suspicion is that Dave will want to essentially adopt the line being taken by Mark Oaten this evening – that rather than talking about the environment in terms of taking a bit of pain now in order to avoid bigger problems down the line, all we have to talk about is simple pain-free solutions such as money off council tax for recycling and pretending that bio-ethanol will allow us to carry on as before. It will certainly have its detractors and I don’t see the Truckers Lobby liking it very much, but it will look more credible and make us look like we are prepared to be more honest about what needs to be done. Lembit’s analysis on Meeting the Challenge that we should be more willing to take risks suggests to me that he is backing the wrong candidate here.

But we won’t get anywhere unless we are willing to champion it as one of our Big Ideas. That means doing everything we did a couple of years ago – and more – with local income tax. It won’t be an easy sell, but I really believe that if we sell it with conviction we can significantly shift the debate onto our ground over the next couple of years.

This is exactly the sort of thing I want this party of ours to be doing and I’m delighted to be supporting a candidate who wants to lead in this direction as well.

6 thoughts on “The tax shift

  1. I agree with your general point.

    The challenge for Mr Huhne is to now broaden out his environment policies and show that he is not ONLY reliant on a tax shift.

  2. I think this has been an excellent agenda for Chris to take up without significantly compromising the work of the Tax Commission. Peter – it would be foolish for a candidate to go into much greater detail at this stage while the Commission is still deliberating.

    A key and important policy debate to raise though.

  3. I am not so sure I agree with Sam, that a broadening of environmental policies is so important. Environmental policy too easily turns into a shopping list of marginal-good ideas. I very much like the idea of focussing on one issue – energy – and actually doing something significant about it for once.

    Not just marginal-good ideas either. Council tax rebates for recycling! Oaten should be shot for that. It would probably cost more to administer than any of the recycled materials produced are worth.

    I am less convinced that reduction should be a priority. Other things being equal, using less energy would be good. But if we look at peoples reasons for travelling – to work, shop, enjoy leisure, meet friends, maintain family contact – these are not things people ought to do less of, they are good things, and it is good that people can choose to do them relatively freely. The priority should be massive investment in renewables, particularly offshore wind and marine.

    What excites me about biofuels is that if the energy crops are edible as a last resort, we can maintain food security while liberalising food markets and importing more of what we actually eat. Food security is rather more important than energy security. How many policies can make positive contributions to four areas: energy, agriculture and rural viability, free trade reducing the cost of living, and third world development?

  4. One of the least good arguments for biofuels is food security. Generally speaking we are talking about crops such as sugar beet or oil seed rape (depending on what part of the country you grow it in), meaning that unless you want to live off a diet of deep-fried Mars bars, it is pretty limited!

    I don’t have a problem with introducing council tax rebates or similar as an incentive to recycle. My problem is with Oaten’s assertion yesterday that it was an either/or thing with Oaten representing the carrot and Huhne representing the stick. But unless you have the taxation stick, you won’t be able to afford the rebate carrot.

    Again, let’s be clear. No-one is saying that money shouldn’t be spent on environmental projects and incentives. What Huhne IS saying is that we should radically increase environmental taxation while not increasing the overall burden of taxation. And if you subsequently need to cut taxes, then income tax is a prime candidate.

    I agree 100% about the need to avoid green shopping lists. In my view that has been the big failure of our last two general election campaigns and the “green box” approach. It lead to us having lots of mini, pale-green policies, but suggested very little in terms of overall strategic green thinking. We should only have one green message in the next campaign, but it should be a killer.

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