Neither party is being honest about tax rises
Promises not to raise headline rates are designed to distract from the fact inflation is dragging millions of people into paying more. But history tells us that candour never pays on the campaign trail, says Will Cooling
You may not know it from the campaign, but if there is one thing that everyone agrees on, it’s that whoever wins the next election, taxes will have to go up.
In preparation for what turned out to be a pre-election budget after all, the Office for Budgetary Responsibility outlined the sheer scale of tax rises planned by Jeremy Hunt, with the Chancellor committed to inflating away the increases of the personal allowance pushed through by George Osborne. Not only will that mean low-paid workers once again pay income tax, but more and more higher earners pay the 40p rate on some of their income. Indeed, a key Tory election commitment is to protect pensioners from the implications of this policy, by creating a special, higher personal allowance for them.
Strangely, Labour has not rushed to highlight this, largely because inflating away the value of the personal allowance is part of Labour’s plan too!
There is something deeply peculiar about the two parties furiously arguing over taxation when on this crucial measure they are in complete agreement. Worse, the measure is deliberately designed to be misleading, with both Labour and the Tories hoping that promises not to increase Income Tax or National Insurance will distract voters from the fact that they are significantly increasing how much the state collects in personal taxation.
It is customary at this point to sigh at dysfunctional tax system and yearn for politicians to be more honest with the public about the type of investment needed to fund the public services that we all want. After all, the proportion of the national economy taken up by taxes is still below that of other wealthy countries, and considerably below Western European countries whose social model most closely resembles our own.
The problem however is that you can’t take the politics out of politics. For all his many faults, Rishi Sunak tried to honestly raise taxes to pay for the Covid recovery in hospitals and schools, and all it did was help Liz Truss beat him to the Tory Leadership. Meanwhile Sir Keir Starmer is haunted by the two oppositions that lost elections they were meant to win; 1992’s Labour and 2010’s Tories. Both parties went into the election midway through modernising projects, but at the last moment revealed a more ideological edge than many expected, with John Smith’s Shadow Budget promising substantial tax rises, whilst George Osborne argued the financial crisis proved the need for aggressive spending cuts.
Given the sheer scale of problems facing the country it is not ideal that Labour cannot be honest with the public about how much tax they will need to raise to address the problems they will soon inherit. Likewise, it would be better for everyone if we move away from this rather odd obsession with tax rates and look to how we can reform taxes to make them as efficient and progressive as possible. But Smith wasn’t rewarded for his candour, and only the ordoliberalism of Nick Clegg and Danny Alexander allowed Osborne to implement his plans as Chancellor. Starmer on the other hand, will surely feel his caution has been vindicated by how easily Labour was able to rebut the Tory accusations on tax last week.
But nobody should be under any illusions that what gets you through a six-week campaign is the same as what makes you an effective government across five years. The Tories would be in a better position today if Rishi Sunak had successfully improved public services rather than overseeing their decline. Upon entering Downing Street, Sir Keir Starmer will have to quickly pivot from deceptive platitudes on tax to finding the money to fund the improvements that voters expect him to deliver.
Will Cooling writes about politics and pop culture at It Could be Said Substack