Polly Toynbee mourned the death of social democracy in the Guardian yesterday which, based on her definition, is not something I will be shedding many tears over. He kneejerk reaction that what Brown should have done instead of raising the IHT threshold was to increase income tax on people with incomes above Â£100,000 was akin to arguing that instead of shooting himself in the foot he should have simply shot himself in the head. Not only would such a move have been massively unpopular, but it wouldn’t have made much economic sense either.
Fortunately, calmer voices were also to be found in the Grauniad, with Shelter’s Chief Executive Adam Sampson giving a much more lucid account about why wealth taxes are a good thing and the government so wholly wrong this week. In doing so, he breaks a major taboo, suggesting that our home owning economy might not be the unambiguous good that the cross-party consensus asserts.
The problem, which Sampson readily acknowledges, is that when you live in a society where 70% of the electorate are home-owners, making the national interest case for wealth taxes is a thankless task. Quite what a mountain we have to climb is summed up by Andy Beckett’s article on IHT which explores quite how unpopular the tax is and why. Beckett or more precisely Professor Stuart White, for that is who he is quoting, manages to both sum up the conundrum and miss the point with this sentence:
“What seems to have come through in Britain, post-Thatcher, is not so much a meritocracy as a feeling that what you get is what you’re entitled to.”
Michael Young, the man who coined the term meritocracy in 1958, became exasperated towards the end of his life at the way in which politicians came to adopt the term uncritically. His 2001 essay on this is even more relevant now than it was back then. The point is that exhorting meritocracy leads precisely to the view that people get what they deserve. The political establishment’s failure to challenge the idea that it is okay for the rich to get ever richer so long as you piously acknowledge the importance of “equality of opportunity” is precisely why the general public seem so resistant to wealth taxes. The fact that it could lead to, among other things, lower income taxes, increased social mobility and a more entrepreneurial culture falls on deaf ears.
The vested interests which ultimately defeated the 1909 People’s Budget sat in the House of Lords. Sadly, those same vested interests now dominate the electorate (although I suspect that over the longer term these mini-property empires will begin to aggregate as some manage to press home their inbuilt advantage better than others). For a substantial minority of the population that represents the death of hope: a life of no accumulation of assets, high income taxes and high user charges on services.
I see this as a profoundly depressing future; the very antithesis of progress whether you are coming at it from a liberal or a socialist perspective. Yet the Lib Dems can’t really give Gordon Brown too hard a time over it. While the rhetoric of our taxation policies is quite sound, almost everything we are committed to doing in our hypothetical first term of government is to compound the problem. In the long term, we’re committed to land value taxation; in the short term we’re committed to scrapping municipal property tax (making the eventual implementation of LVT much harder). In the long term, we’re committed to reforming IHT into an acquisitions tax, thus closing off a major loophole; in the short term we’re committed to raising the IHT threshold as well. Ming was careful at is conference speech to talk of transferring the burden of taxation from incomes and onto pollution – not resources. At a time when he desperately needs a USP, and the cause of progressive taxation needs a champion, he’s being advised to back away slowly from the sound of gunfire.
But perhaps I’m being too harsh on political parties. They are, after all, prisoners of an electoral system that gives enormous power to a handful of swing voters. All the time the parties are forced to chase the same small part of the electorate around like Pepe le Peu, the scope for making the case for broader policies will always be limited. Somehow we need to capture the public’s imagination outside the party political sphere. Anyone got any ideas?