The Lib Dems have gotten bored of outflanking Labour from the left and have decided to outflank the Tories from the right instead. Well, that’s the interpretation some commentators are putting on the news that Nick Clegg – pictured - has switched his party’s fiscal policy to a reduce public expenditure/cut taxation platform, at any rate.
Clegg wants to cut government outlays by £20bn, equivalent to 3% of the total. He is noticeably less clear about where the axe is going to fall.
New Labour’s ludicrous ID card scheme will be scrapped – and amen to that – but that money is already earmarked to boost the Old Bill’s coffers. The number of MPs will be reduced by 150, and some defence projects could get cancelled. Watch this space.
The universal assumption is that this act of repositioning has to be popular, especially as the Tories have pledged to stick to Labour spending plans if they win the next election and restrict any tax cuts to ‘sharing the proceeds of growth’. Tory rightwinger Iain Dale – writing in the Daily Telegraph today – is palpably beside himself that another party is doing what he thinks his party should be doing.
But is promising tax cuts really an instant route to extra votes? Well, yes and no. Clearly there is a large slice of the electorate that will find Clegg’s stance attractive, especially as most of us are finding the going tough right now.
On the other hand, people are realistic enough to know that if society wants the things that tax revenues buy, tax revenues need to be raised to pay for them. The debate boils down to how the money gets spent.
From a leftwing viewpoint, it is morally objectionable to make pensioners pay VAT on fuel to fund nuclear weapons. But clawing back some of tax breaks doled out to the super-rich under successive governments since 1979 to fund public services is surely the right thing way to go.
In the current ideological climate, this is not an easy case to sell. Britain has yet to see through the Thatcherite lie that public investment is by definition squandering money. The fact that Sweden and France have superior socialised medical systems, for instance, is regarded as somehow unrelated to those countries’s higher levels of state spending.
Rightwing newspapers often campaign for such things as higher pay for nurses, but against the tax rises that alone could fund them. The CBI moans about taxation ‘burdens’ on business, then in the next breath calls for better road and rail infrastructure and more taxpayer cash for education and training. And it’s funny how the bosses stay strangely silent when anyone suggests that tax credits amount to a massive state subsidy for low pay.
It is not as if the City elite live on another planet. It is not on for a small number of plutocrats to pay little or nothing to the public purse, while benefiting from what it pays for in 101 ways.
Even if they do use private hospitals and independent schools, who do they think foots the bill for the roads their chauffeurs drive them along and the streetlights outside their offices, or the courts that hear their litigation claims, to give just a handful of examples?
Given that the way in which the decades of neoliberalism have seen society reconstructed around the needs of capital, what excuse can those at the top evince not to properly contribute to the arrangements that enable them to accumulate and hold their wealth?
Nor is Clegg’s cut-price 1980s Tory Boy routine going to play well with the entire Lib Dem voter base, which includes a layer of middle class people who actually think they should be paying more tax and not less, if only out of guilt.
I recall spending the night of the 2005 general election watching the results come in on television with a small group of friends, almost all of whom had been strong Labour supporters in the Thatcher and Major years.
During that evening’s Rioja and spliff-fuelled political discussions, it emerged that the North London middle-aged bien pensant demographic is irrevocably split. One person had voted Respect, another Green. But four had backed the Liberal Democrats, citing opposition to the Iraq war and the 50p in the pound tax plan for higher earners among their reasons.
OK, the gathering hardly represented a cross-section of the general public. But those assembled do make up an identifiable social layer, of a size presumably big enough in relative terms to be factored in to Lib Dem calculations.
Being self-consciously hip North Londoners - Britain's most derided demographic after chavs - these people do not wear beards and sandals. But the mentality is pretty much the same. The moral is that you can indeed win friends and tax people, and the Lib Dems may be making a mistake if they stop trying.
Posted at 14:01, 18 July 2008
Comments (10)
The Lib Dems have gotten bored of outflanking Labour from the left and have decided to outflank the Tories from the right instead. Well, that’s the interpretation some commentators are putting on the news that Nick Clegg has switched his party’s fiscal policy to a reduce public expenditure/cut taxation platform
That's predicated on the notion that cutting spending/reducing taxation can never be left wing.
Not so. It rather depends on what spending is cut and which taxes are reduced!
Full disclosure: I'm a Lib Dem member, so that may bias my opinions.
From what I know of the tax policy, the objective is to cut those taxes which fall hardest on the poor. The lowering of the basic income tax rate would benefit those who are paying income tax despite earning only the minimum wage. Abolition of council tax and replacement with an income-based local tax would likewise shift the burden from the poorest on to the better off (although personally I'm more in favour of land value tax or something similar, but that's another debate). Removing some of the reliefs on pension contributions for higher rate taxpayers would also further alter the distribution of the tax burden, away from the poor and on to the rich.
Once you factor in an overall reduction in spending, you end up with the poorest third of the population paying a lot less, the middle third paying something similar to what they do now or perhaps slightly less (it's hard to generalise, especially where green taxes are concerned) and the richer unequivocally paying more. Local income tax would also save a lot in admin costs as it's a lot simpler, and making it income-dependent would reduce the overhead of things like council tax benefit. Removal of tax loopholes likewise simplifies things. These are just simple good ideas - not revolutionary, but just, well, pretty good, and as such a hell of a lot better than what anyone else is proposing.
I have to object to the 'outflanking the Tories from the right' line simply because the Tories have never been too interested in cutting taxes on the poor; if they've believed that the poor benefit from tax cuts it has mostly been in the form of illusory 'trickle-down' from the tax cuts received by the rich. This is fundamentally different from the Lib Dem proposal. As an aside, I remember a Tory strategic argument against cutting taxes on the poor was that once the poor realised that they weren't paying any income tax, they would never vote for the promise of tax cuts again.
I'm a Tory and I believe in tax cuts for the poorest. Some of the poorest workers face a marginal rate of tax of approximately 100% which is of course a disgrace.
The thing I welcome most about Clegg's ideas is that he is arguing for smaller government. This is essential.
The number of MPs will be reduced by 150...
Through judicious use of the guillotine I hope.
Why stop at 150 though?
"On the other hand, people are realistic enough to know that if society wants the things that tax revenues buy, tax revenues need to be raised to pay for them. The debate boils down to how the money gets spent."
I'd say further from that the debate boils down to just how the "spending cuts" will be made and how convincing they are. As Rob says, I don't think this is flanking the Tories from the right, it is a very liberal measure if it can actually be pulled off. It scraps less necessary spending, especially as you say for ID Cards and hopefully other illiberal measures, and gives people on lower incomes more money to spend. In turn this should have returns on VAT for the government also.
The idea that the left needs to simply take money from everyone to the degree it currently happens, certainly after the shameful scrapping of the 10p rate, is a fallacy that hasn't worked. It hasn't brought people out of relative poverty and it hasn't saved pensioners from "fuel poverty" either. Perhaps if the left had a government they could align themselves to that didn't put their money on such right wing projects then this kind of Lib Dem policy wouldn't sound so favourable?
On a less focused upon point: As anyone who has worked for a member of parliament will know, an MP's day of work tends to be from 8-9am in the office till 8-11pm at night working (and working all weekends and summer, the talk of 'long holidays' in the media is bullshit). Even then there isn't enough time in the day to do the necessary reading, research etc; to be on top of the legislative detail, reports and news (not if they're focusing on constituency work). Cutting their numbers? Idiotic - maybe Clegg is still thinking at an MEPs' work load...
If anything what is needed is MORE politicians, with a split between those focused on domestic and those focused on foriegn affairs. I realise such an opinion will lead to hoots of derision etc. But it remains the case.
I know, I know, politicians are all lazy, greedy scum. It's just that, well, that's total crap. And I'm bored of the small dick waving on the issue.
@Rob, did you know Clegg supports the govt's welfare reforms which will see disabled claimants lose hundreds of pounds a year, in fact I think he wants higher rates of D/benefit stopped and capped at JSA levels, 54.00 a week, though Vince Cable is at least opposed to them.
As the great liberal, Adam Smith, noted, though, the burden of taxation doesn't fall on the waged and salaried class, cutting taxes on the poorest ultimately leads to easing the tax burden on the wealthiest (that share of profits going to employee tax, sorry, income tax, is pretty hard to avoid, compared to corporation and profits based taxes). Cleggs just busy ignorance peddling...
"I don't think this is flanking the Tories from the right, it is a very liberal measure if it can actually be pulled off. It scraps less necessary spending, especially as you say for ID Cards and hopefully other illiberal measures, and gives people on lower incomes more money to spend. In turn this should have returns on VAT for the government also."
Surely if you're genuinely wanting to cut tax on the poorest, VAT would be the tax you're cutting. It's about the most regressive one going.
It would be difficult to cut income tax on the working poor as, through the current tax credit system, they actually get money out of the tax system rather than paying into it.
Obviously ditching council tax is more populist than cutting VAT but it will be a challenge to find a way to do it which does make the system of local government funding even more ridiculous than it already is.
Well after another green paper for the disabled, and yet another copy cat Tory agenda, I think the Lib dems look better and better, but Clegg looks like Blair.