Tax and public services – let’s be honest

received_10152479075421238Nick Hopkins, a Labour activist in Glasgow, says Labour needs to get honest about tax.


If Scottish Labour can’t be honest about tax, with ourselves and with others, the prospects for social democracy in Scotland and the UK are grim.

Sometimes as a researcher you have a conversation that brings you up short. A couple of weeks ago I sat in a draughty canteen in a Scottish hospital opposite Fiona*. A bit younger than me, Fiona was in hospital looking after her daughter. Fiona described her life to me completely without self-pity, making the challenges I face bringing up two healthy children pale in comparison.

Two years ago her daughter Cara picked up an infection. Within a couple of days she was in hospital fighting for her life. The damage wrought by the infection left Cara doubly incontinent, hearing and visually impaired, and needing both 24 hour care and daily hospital treatment.

Fiona was without self-pity, but she was aware. Aware of her own tight circumstances and that the state financial support available to her would have left her in poverty without Cara’s father’s small contribution. Aware of the unlikelihood of ever returning to her previous reasonably paid work in marketing.

Fiona was also angry. The treatment Cara was getting from the NHS was excellent, but after months of fighting, she still lacked an adequate care package from her local authority. Cara doesn’t fit standard categories, no-one seems to want to take responsibility to sort the situation, and the local authority is strapped for cash.

Only two nights a week of carer support, and nothing during the day, have left Fiona exhausted. As she said, ‘I’m OK to talk this morning, I had the carer in last night. If you’d got me tomorrow…’.

It was a sobering three-quarters of an hour that stayed with me over the next few days. Sobering personally, as I continued to grumble, if more guiltily, about my own battle with a non-sleeping toddler. Sobering politically, because it made clear what all the talk of austerity, of pain, and of tough choices in our political debate really means.

Fiona needs our welfare state in three ways; to keep Cara alive; to keep them both financially secure through Income Support, Carers Allowance and tax credits; and to provide the care support to keep her capable of being the mum she wants to be.

The NHS remains, at least theoretically, protected from cuts. As an electorate we continue to demand that Cara is provided with the medical treatment she needs, she will not be allowed to die on our watch for lack of state funds. The extent to which we are prepared to continue to provide the social care and level of benefits that she and Fiona need for a decent life is much less clear.

A situation appears to be looming in which the proportion of national income going on public spending will be permanently reduced. Is this inevitable? Must we accept being forced into making what Declan Gaffney terms ‘tragic choices’, where all the options we have mean going against our core values, where we end up choosing between funding benefits and social care properly?

The basis for our response has to be fiscal honesty, with ourselves and others.
I’m no fan of the austerity policies of the current government. Cuts have fallen heaviest on those with least, and Osbornomics have left the recovery slower and weaker than it should have been. I’m with those (like Frances Coppola, the IMF and Martin Wolf) who say we should currently be borrowing more to invest, keeping the recovery going and reducing the long term readjustment needed.

I’d bet my last pound that Ed Balls fully agrees with those commentators. But Labour can’t fully follow their proposed path, our economic credibility dashed by the recession on our watch, much of our political capital spent on the bank bailout. The flawed Tory interpretation of the crisis and the appropriate response prevails in the media and amongst the public (see this excellent critique from Simon Wren-Lewis). It’s not clear that we can change that ourselves any time soon.

More importantly, even if ‘media macro’ moved in an economically literate direction tomorrow, increased borrowing is no long term escape from all hard questions about public spending. Of course extra money for schools, hospitals, social care and benefits did not cause our economic strife. But we went into the recession with our tax take at an insufficient level to pay for our social democratic aspirations, and our ageing population continues to place ever higher demands on our public finances.

Lefty wonks like me need to honest about our limits too. Yes, we can get better and more efficient at delivering services, and do more to prevent some problems arising. But that often takes up-front investment, and efficiency gains are often either not cashable or not achievable. Delivering on service integration, personalisation and all those buzzwords should perhaps be seen as a route to improving the care Cara gets, not a realistic route for achieving substantial savings.

We need, therefore, to get honest about tax.

There is, of course, no taxation deus ex machina. Yes, we can tax more progressively, giving some very rich people as much of a soaking as we can in the teeth of media hostility in an open economy which is home to a large number of sophisticated accountants. Yes, we can employ our own sophisticated accountants and get better at collecting tax and closing loopholes. But neither will be enough to solve the challenges we face.

We need to level with the electorate that delivering the social democratic goods we want, and I believe that our society wants, will cost most of us more tax.

That is not an easy sell in a country full of overleveraged, oversqueezed households. At the UK level it will mean taking on a Tory party with heavy media backing itching to paint us as tax and spend(thrift) incompetents.

At a Scottish level it means taking on an SNP pursuing a right wing agenda on tax whilst spinning a left wing populist agenda on spending. It means taking on a party that has managed to convince a substantial proportion of our core voters that independence would have meant no austerity or tax rises, and whose rhetoric has spent the savings from Trident several times over.

I have four suggestions as to how we proceed.

Firstly, let’s never fall into the trap of Osborne’s macho posturing on austerity. It’s wrong in tone, and it warps our soul to do it. In the long term it means that the case for spending on public goods is lost.

Secondly, we need to keep making the arguments for the welfare state, and keep asking basic moral questions. We must continuously stress the ways that poverty damages people. We must remind voters that the welfare state is there to protect everyone from the worst that can happen to anyone. We need to ask whether the exhaustion of a mum, the denial of opportunity to a child, or the limiting of an older person’s care contact to fifteen minutes in every twenty four hours are prices worth paying for a council tax freeze which benefits the well off most of all.

Thirdly, we need to finish the debate on priorities, charges, targeting and universalism that we started. If funding to a public service is cut, it often simply transfers the cost to an individual. It might be fair to ask better off pensioners to pay more for their bus travel, or students with a long, well-paid career ahead of them to make a contribution to their higher education. Should we really force Fiona to have to scrabble together cash to buy extra care?

Finally, constantly talking tough choices leaves us more than a little short on the hope thing. We need to communicate a coherent strategy for rebuilt economic prosperity, something that we are not doing at the moment. If we are going to ask people for more money, we must balance that with genuine hope of an improvement in their own situation. Plus, if we can rebuild our tax base, the honesty required of us will be a little less challenging.

This is not an easy fight. Perhaps at a UK level it seems politically suicidal to do much more than hold our current line against unfunded income tax bribes. But we cannot avoid the fight in Scotland. At the very least we must take on the SNP on the Council Tax freeze.

If we cannot fight here, where the political culture has greater social democratic pretentions, we will fail Fiona, Cara, and all those across Scotland and the UK who need us, for years, maybe decades to come.


*All names and some details relating to ‘Fiona’ and ‘Cara’ have been changed to protect anonymity.

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11 thoughts on “Tax and public services – let’s be honest

  1. “an SNP pursuing a right wing agenda on tax”

    Please elaborate, without citing SNP policies which were actually pursued first by Labour (eg cutting corporation tax).

  2. Honesty. Compassion. Common sense.

    All too often theses are missing or truncated in political debate and comment.

    Not so in this blog posting.

    Without being too nasty the First World War description of “lions lead by donkeys” floats into my mind!

  3. That Labour has moved to the right as well at times seems a pretty poor defence against the charge that the SNP are pursuing a right wing agenda on tax.

    At the moment it’s clear that the SNP are pursuing a more right wing course on tax than Labour. I think Labour needs to increase the red water between them because public services are crying out for more cash.

    1. It’s not clear to me. Explain it.

      Cutting corporation tax is in context a redistributive policy, aimed at redistributing money (in the form of employment) from London to Scotland – something that’s urgently required to rebalance the UK’s massively skewed economy. Other areas should do it too.

      1. Except it’s not clear that cutting Corporation Tax has the desired effect on the overall tax take.

        Labour is to the left of the SNP on the 50% tax band, Corporation Tax, and is at least prepared to entertain discussion on the Council Tax. It’s also arguable that tuition fees, in many ways a graduate tax are a sound left wing option when considering the opportunity cost of free higher education.

        1. “Except it’s not clear that cutting Corporation Tax has the desired effect on the overall tax take.”

          That would depend on the circumstances.
          But that specific tax take shouldn’t just be considered in isolation.

          I do see a valid point that a slightly lower rate than the south east would be redistributive to Scotland in terms of the wider economy, which would bring the SNP to the left of labour on this issue, overall.
          Of course, more jobs equals less benefits.

          Of course we are getting into competition elements then.
          But, as mentioned, there isn’t really a level playing field in the first place.

          Do we really want to preserve the status quo here?

  4. A very good article Nick which helps to show that Labour is not entirely composed of self-serving career politicians despite appearances.

    As an SNP member I’ve supported the council tax freeze, but its time might be drawing to a close. I’ve supported the lowering of corporation tax insofar as it might improve prosperity and therefore reduce poverty, but I accept that the case for it has yet to be proven. But as Will says, it’s hard for Labour to criticise the SNP for this policy without distancing itself from Gordon Brown’s tenure in high office. Attempting to characterise the SNP as having a “right-wing agenda” is pure spin by you.

    I was especially taken by your second last paragraph, though not in the way you’d want.

    “This is not an easy fight. Perhaps at a UK level it seems politically suicidal to do much more than hold our current line against unfunded income tax bribes. But we cannot avoid the fight in Scotland. At the very least we must take on the SNP on the Council Tax freeze.”

    At a UK level, voting Labour is pointless because any attempt to create a fairer society would be “politically suicidal” for them. That’s why I voted Yes in the referendum, because in Scotland it’s acceptable for political parties to have policies in their manifestos which would mean a reduction in inequality and improvements in the levels of fairness and democracy.

    1. Two thoughts.

      Labour has to take the risk of arguing for higher tax than the Tories on more than just the very wealthy. The Tory shift to the further right on tax at their conference means that we do that by standing still, but also makes the possibility of properly funding public services in England more distant/ politically difficult. Even shying away from the morally preferable course, Labour tax policy will still reduce inequality, as will some of its other public commitments, it just won’t do enough to protect services.

      We have the powers now to do something different in Scotland. It’s noticeable that we have thus far chosen not to use them very much. Post Smith there will be even more powers that can be used. I don’t there will be a huge hike, given our economic relationship with rUK , and the lack of great enthusiasm in Scotland for higher tax, but I would propose that at the very least we deal with the council tax freeze. I’d also be arguing for a use of income tax powers to raise the overall tax take.

      I voted No for a host of reasons. Amongst them was my belief that the austerity forced by independence and the tragic choices we would have forced would have been so much worse.

      1. I don’t think it’s fair to blame SNP or LibLab governments at Holyrood for not using the tax varying powers – the original ones were unusable. The situation in future will hopefully improve, though by how much is up in the air. The ability to vary bands as well as rates is essential if we’re to have a tax system which can suit our needs and allow us to raise the tax take in a way which the population will accept.

        I’ll be delighted if both the SNP and Labour in Scotland move leftwards in this area. I’m not very confident that Labour will – Jim Murphy’s history and noises coming from John Mcternan certainly don’t suggest they will.

        From my viewpoint there are certain services which government should be funded by us to supply. Education and healthcare are two of them. Scottish Labour and Johann Lamont’s positions on tuition fees and prescription charges have done them no favours at all, and if we raise taxes above the level of rUK we have to have headline policies like these to show that they make an difference to people’s lives.

        I feel that Labour’s opposition to policies like these has been for opposition’s sake. If Labour elect Neil Findlay instead of Murphy perhaps there’s a chance that they can start afresh with a new approach rather than just ‘SNP bad’.

  5. Re the last para of my previous comment.

    It turns out that Neil Findlay shares Johann’s views. Sorry Labour, you’re ****ed.

    From the Times

    “Universal benefits for Scots such as free university tuition and prescriptions have to be reconsidered, Neil Findlay, the left-wing candidate for the leadership of the Scottish Labour Party, has said.

    He said he agreed with the previous leader, Johann Lamont, who provoked controversy when she raised the issue of a “something for nothing society” — though he said he would not have used those words. “

  6. Nick’s third suggestion is the most important and has to be explored before Prop4 can be decided. Labour cannot just stand for an unchanged 1945 settlement and statism but needs to look seriously at the link btw fairness/equality and relatively high taxation (Scandi model) and other mutual insurance-based models (Germany e.g.). No shibboleths, including universalism…

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