Nick Clegg has been all over the airwaves this week, promoting one of the Liberal Democrats’ flagship policies: raising the income tax threshold to £10,000. This is something that everyone interested in social justice should naturally be inclined to support. If implemented in the forthcoming budget, it would reduce the burden on low- and middle-income earners, putting money back in their pockets at a time when many are finding the cupboard bare.
The policy also leads naturally to what some are already calling ‘Phase 2’ – tying the threshold directly to the current minimum wage. This would, again, be a perfectly sensible policy that would lend the word ‘minimum’ some credibility.
However, Clegg and other Lib Dem Parliamentarians advocating this policy, whether wholly or in part, must take care with their rhetoric. The dangerous libertarian view that tax is somehow a form of theft must not be given room to breathe and grow. Yet politicians of all parties have allowed precisely this to happen, partly by feeding the contradictory desire espoused by many voters – for lower taxes and improved public services to be achieved simultaneously.
The Liberal Democrats should be the party making the case for a progressive and redistributive tax system that sustainably funds public services. Previously popular Lib Dem policies, such as the famous ‘penny on income tax for education’, have shown that there is an appetite among voters for parties who are honest about where public money will be spent. Perhaps a liberal party should also be considering ways to enable individuals to determine, to some extent, where their tax should be spent.
A criticism of our manifesto that I heard at the last election, from voters who value social justice highly, was that Liberal Democrat rhetoric was too focused on the individual. If we are to convince voters that we are a party capable of representing individuals, communities and the country as a whole, we need to find policies that encourage citizenship. A renewed focus on a clearer tax system is just one part of a stronger and more tangible social contract. Now is the time for the Liberal Democrats to become the fair tax party.
* Tom King is a Liberal Democrat member and activist. He has worked for Liberal Democrat MPs and served on three policy working groups. He is the author of The Generous Society.
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7 Comments
I thought we already were, although I think our plans can go even further. If our Land Value Tax supporters get their way then that will fund further tax cuts on income and reduce the tax burden on the poorest.
I also like the idea of using business tax incentives to encourage good behaviour, e.g. awarding a living wage to those that pay all their employees a living wage.
What Daniel said – first paragraph anyway.
Fair taxation does not involve penalising productivity, but reclaiming community created value (aka rent).
What distinguishes liberal progressivism from other kinds is precisely that we believe that the only true test of whether a policy is right is whether it helps to create strong individuals, capable of shaping their own lives.
Mill rightly pointed out that a state which belittles its citizens will find that with small citizens no great things can be achieved. Yet the current trends in British politics are overwhelmingly in that direction. People are too stupid to make decisions about alcohol, so we’d better make it harder for them to get it wrong, bless. People are weak-willed and easily swayed, so we’d better restrict the advertising of tobacco even more, despite already banning most advertising and having forced companies to put death warnings on everything. People can’t be held responsible for deciding what to eat, so we need to regulate shops to make chocolate less prominent than fruit.
As for tax, surely it is evident that it should be kept as low as possible? Or perhaps not – I am aware that there was a failed attempt a few years ago to block any talk of as cuts, and in particular the income tax threshold change, until every spending commitment had been fulfilled (I.e. never, in the economic context). Reducing taxes on work in favour of broadening the tax base to cover wealth is absolutely in the spirit of ournparty’s traditions. Lloyd-George went to war with the House of Lords for wealth taxation; throughout the decades since we have fought for it.
I also rather resent the expression “dangerous libertarian view”. Aren’t we all libertarians in this party? Don’t we all alive the freedom of the individual? Ceding this ground is the last thing any liberal should be prepared to do – we own it, and it is our notion of freedom – strong individuals, all capable of shaping their own lives – which best captures both the historic traditions and the mood of British people today.
Since at least Thatcher the Tories have followed an incomplete version of this approach: they have sought to remove barriers, yes, but have often forgotten the need for an enabling state to provide a springboard for those who struggle. They have also neglected the key liberal tradition of doubt (the reason for evidence-based policy), advocated so well by Mill: “the Lady’s not for turning” is not a pronouncement any liberal should admire. We need to show the country what an aspirational society is really about, and how the Tories will not deliver it.
Our focus on the individual is the very thing that makes us liberal. We often get it wrong, as a party, and I know we have lost supporters as a result (some of the above, for example, are areas where we have deeply illiberal policies which betray a degree of contempt for the public, albeit not as great as in rival parties). We should never, however, sacrifice our principles.
Thanks for that comment, Stuart.
I agree with you entirely that our focus on the individual is essential. That is why I am advocating an approach that is upfront and honest about where tax will be spent – increasing opportunities to hold the state to account – and I also hint in the article about the possibility that individual taxpayers might be given the power to determine where at least some of their tax goes. I think this is a vital and liberal idea that should be prioritised if we ever achieve a genuine simplification of the tax system.
I don’t, however, agree that the ‘only true test’ of a policy’s success is whether it creates strong individuals. I think that is an important aim for any policy, but I disagree that it should ever be the ‘only’ test; as a party, we have also long claimed to be capable of building and empowering individuals, families, communities and society as a whole.
The phrase ‘tax should be kept as low as possible’ is a little meaningless given the breadth of possibility for its interpretation. It is precisely for this reason that the argument should be around what kind of public services we want the government to maintain, and to create a tax system on that basis; rather than campaigning simply on a tax-cut or tax-switch program (although it is, of course, important to ensure that the tax system is also as fair as possible). The ‘penny on income tax for education’ policy is an example of identifying an improvement in a public service and tying it directly to a tax change – in this case a rise – but I am not suggesting by any means that we should somehow aim to take more money from citizens than is necessary.
I would have thought it was clear from the ‘view’ that I was referring to that I was using the word ‘libertarian’ in its more modern and less narrow sense of extreme fiscal conservatism (i.e. an opposition to a state that is active in any meaningful way). I would imagine (although I might be wrong) that there are very few such people in this party. However, if anyone was offended by the use of the term, I apologise!
Thanks for your reply, Tom. I’ll respond to it paragraph by paragraph, if I may.
I largely agree with your first paragraph (meaning the first substantive one, not the one line at the beginning!), though I am sceptical that allowing people to direct their own tax money will work – surely public money should be directed according to where it is needed? That’s not to say I don’t like the idea in principle, but when it comes to giving people more say over how their money is spent it’s hard to beat letting them keep more of it!
I’m less sympathetic to your second paragraph. Communities are great, but communities, like government, can do both good and bad – they can oppress as much as they can empower. In public policy terms I therefore prefer to think of them as a tool in working towards the goal of strong individuals – because communities are very definitely valuable in that – rather than as an end in themselves. It is important to keep in mind that “strong individuals” does not have to mean “isolated individuals” – I accept entirely that it is worth reiterating this point, perhaps more than I would instinctively like.
In paragraph three, you are of course right that “low taxes” is a little vague, and I do agree that there is no a priori right level of taxation: it depends on what we want the state to do. However, I think it is important to remember that tax represents a transfer of power from taxed to taxman – and so, ultimately, from individuals to the state. I would argue therefore that tax cuts are indeed good a priori (more or less in the way you set out in the final sentence of your paragraph), but with the caveat that there may be a posteriori justifications for not implementing them overall. However, I do disagree that we should move away from a tax-switch platform: this is a key part of our liberal tradition, and in my view has the potential to do more long-term good than almost anything else on the current British political agenda.
As for the use of the term “libertarian”, I prefer a broader definition, as you have apparently guessed. I don’t particularly identify as one, though. Having said that, there are a significant number of people in the party who do, and it’s not really a form of fiscal conservatism. Indeed, it isn’t one single thing at all, but rather a range of things, surrounding a general diagnosis that the state is not very good at most things (a view with which I have some sympathy). Get a libertarian talking about the banking crisis and they might make Occupy LSX look timid – though they’re more likely to take the view that the crisis was caused by unsound money and the moral hazard of excessive regulation and the likelihood of bailouts. Anyway, I’m more of an Orange Booker myself – an economic and social liberal.
That there was something seriousl;y wrong with taxation has always been a mainstream Liberal idea. Modern Libertarians have designed a variety of non-tax or less-tax programs. Many people are coming to the opinion that coercive tax systems are a form of theft or social dysfunction left over from a less enlightened feudal era, along with false choices such as the individual vs. society, etc..
For information on what people are doing on voluntary solutions, please see: http://www.libertarianinternational.org/apps/blog/show/5326376-lio-milton-friedman-libertarians-lead-largest-poverty-reduction-1st-viable-social-wage-program-in-history-so-there- and the non-partisan Libertarian International Organization, which helped found the Liberal International to which the Lib Dems belong as well.
The very poor that the likes of Evan Harris were concerned about should be catered for through an improving benefits system. Their plight, albeit very real, should be no reason for altering an excellent principle of helping low paid workers by raising the tax threshold. At the consultation session at Birmingham I raised the point of setting a new target prior to the next election, which should include a link to the minimum wage, which in turn should be related to the average income and cost of living.
The Ed Milly postion, as usual, is laughable.