It’s tax, stupid

For much of the last twenty years pollsters and pundits alike have told me and anyone else who would listen that people do not want lower taxes. We have been told that whenever asked, people would rather have better public services.
Therein lies the problem. For years Labour, the pollsters and others in the political world have lectured people that there is a choice – you either have lower taxes or you have better services. Faced with such a choice most people would tell a pollster they want the better services. That does not mean they will vote for the higher taxes, or
will be pleased when they have to pay them.
It ignores the way the private sector allows you to have both – better quality and lower prices, as manufacturers worldwide continue to offer better, faster and cheaper as a matter of course.
Margaret Thatcher’s government cut income tax rates and was re-elected easily on two occasions. When she offered people the opportunity to pay more for schools and social services locally, by asking everyone and not just the ratepayer to pay a contribution through the Community Charge, the public turned against her – and so did her colleagues.
When John Major, as an early green , imposed VAT on fuel, that too turned out to be unpopular with those who had to pay it.
The elder Bush offered lower taxes, and then in office did the opposite. He only got one term as President. The younger Bush offered lower taxes and delivered, and got two terms, despite the war.
Last night the faces of many Labour MPs said it all. Called upon to vote for a doubling of the income tax rate of the lowest paid to collect the revenue to pay the benefits, some did it through gritted teeth, and some threatened their front bench with future rebellion if they do not come up with a good package of help for those who have to bear the burden.
Labour is already unpopular for its stealth taxes, for its soaring Council taxes and for its sneaky charges. They are pillaging us at the petrol pump, robbing us every time we need a licence or permission, and plundering our wallets and purses. They have seen a huge decline in their vote from 1997 to 2005, and face an even bigger drop if the latest polls are accurate.
The Conservatives have illustrated just how important tax now is to the electorate. Last autumn things were not looking good for the main Opposition party when the Prime Minister was considering an early election. The Shadow Chancellor announced he wanted to take all but the very rich out of Inheritance Tax. It was as if someone had turned the light on in the Opposition’s darkened room. The Conservative party surged in the polls, and the Prime Minister realised he might not win an election. From the moment of that speech British politics was transformed. The government went from the front foot to endless scrambles before the stumps hoping they will not be given out as the ball whistles past them or into their pads.
The 10p issue is more of the same. In a way it is a defining issue. Labour seems to think all it has to do is collect more and more cash off everyone, and then distribute it to groups it favours through tax credits and benefits. It seems to have forgotten that many of its supporters in the heady days of 1997 were single people and childless couples on modest incomes. The government has shown it no longer speaks for them and no longer seems to sympathise with those many people who want to be self reliant, but need to keep enough of their income at the end of the week to pay the bills.
As Bill Clinton might have said, “It’s tax, stupid”. People may go on telling pollsters, if asked which they would rather have, that they would rather have better public services. The trouble is these do not seem to be on offer, however much is spent, because the promised reform is never delivered. Meanwhile privately people are seething about just how much government is costing them.
Boris should remind people that a Conservative mayor would be a lot cheaper than Livingstone. It beggars belief that a typical London household has to pay £300 just for the Mayor and his entourage. Running a separate foreign policy for London does not come cheap.

This entry was posted in Blog. Bookmark the permalink. Both comments and trackbacks are currently closed.

13 Comments

  1. APL
    Posted April 29, 2008 at 9:26 am | Permalink

    JR: "For much of the last twenty years pollsters and pundits alike have told me and anyone else who would listen that people do not want lower taxes."

    I too have heard people say such things. I always say in reply, "go on then, get your check book out", oddly enough no one ever seems to rise to the challenge.

    There is nothing to stop such people paying more tax if they wish to.

    Invariably, they don't. "I want to pay more tax." is middle class socialist cant.

  2. Peter van den Berg
    Posted April 29, 2008 at 10:19 am | Permalink

    I believe that a think tank came up with the optimum rate of income tax at 13%, ie a flat tax. it stated that this rate would produce more revenue than any other, since richer people would not need a Swiss bank a/c, but simply pay it. Russia & the Baltic states have adopted it with great success.

  3. Matthew Reynolds
    Posted April 29, 2008 at 10:23 am | Permalink

    Voters are begining to see that higher public expenditure does not mean better public services or lower levels of poverty . NHS funding is at EU style levels while our standards of care do not match what is obtained in say France or Germany . Higher taxes have led to 100,000 more children in poverty last year . Freemarket policies have improved schools , hospitals and transport accross the EU while a number of countries on the Continent are cutting & reforming taxation . Ronald Reagan cut taxes by 25% while slashing $50 billion from social spending and reducing regulatory burdens and poverty rates started falling in his second term . If Labour did not tax those on low incomes then they would not be trapped in poverty via credits & other payments that reduce the more one earns at a large admin cost . Simply ending tax credits & means tested payments while raising the basic personal allowance to say £12,000 p/a ( a pittance nowadays ) would be social justice as the poverty trap would be slain & smaller government and lower taxes would improve the economy as they have in Eire . Liberal Democrats should vote for that as it means social liberalism and economic liberalism being delivered !

  4. Matthew Reynolds
    Posted April 29, 2008 at 11:23 am | Permalink

    Voters are begining to see that higher public expenditure does not mean better public services or lower levels of poverty . NHS funding is at EU style levels while our standards of care do not match what is obtained in say France or Germany . Higher taxes have led to 100,000 more children in poverty last year . Freemarket policies have improved schools , hospitals and transport accross the EU while a number of countries on the Continent are cutting & reforming taxation . Ronald Reagan cut taxes by 25% while slashing $50 billion from social spending and reducing regulatory burdens and poverty rates started falling in his second term . If Labour did not tax those on low incomes then they would not be trapped in poverty via credits & other payments that reduce the more one earns at a large admin cost . Simply ending tax credits & means tested payments while raising the basic personal allowance to say £12,000 p/a ( a pittance nowadays ) would be social justice as the poverty trap would be slain & smaller government and lower taxes would improve the economy as they have in Eire . Liberal Democrats should vote for that as it means social liberalism and economic liberalism being delivered !

  5. Ian Evans
    Posted April 29, 2008 at 11:31 am | Permalink

    I wonder whether it is actually house prices that will kill off this ghastly government/newlabourproject. For quite a while people have been in denial about the coming house price crash – now that the mood is turning from denial to anger, it is pretty clear where much of that anger will be, quite justifiably, aimed. It is, after all, only ten years since one Gordon Brown promised an end to the damaging cycles of house price boom and bust! (Naive or what?)

  6. Cliff
    Posted April 29, 2008 at 12:24 pm | Permalink

    Often it is how the question is worded that gets the required response.

    "Do you want to pay less tax or loose your services?" will always get people to "agree" they would rather pay more tax.

    However, "Would you like the same level of services but run more efficiently which would mean less tax?" is likely to get a different response.

    Our glorious leader(sic) does not seem good at getting the message of "It is not how much money is spent that matters, it is how that money is spent that matters" over to people.
    Mr Brown et al just rubbish any proposal that Mr Cameron (or any other Conservative) makes with their responses "How will it be funded?" or "That means service cuts."

    For a former PR man, Mr Cameron does not seem to be able to get the above message over.

    People are starting to wake up to the massive growth in the size of the state and how it is really starting to interfere in all aspects of our lives.
    We need to push our message of smaller state, bigger choice and in particular, more choice in how we spend the money we work for, by reducing the tax burden.
    We need to return to the dog wagging it's tail rather than the tail wagging the dog.

  7. David Hannah
    Posted April 29, 2008 at 12:27 pm | Permalink

    It is an often repeated mantra that, when asked, people prefer better public services to tax cuts (however, nobody has asked me, so just for the record, I’d like some tax cuts please). However, I think that what people would really like is better, cheaper services. Alas, only the private sector can deliver such miracles.

    The tax-cutting agenda has been derailed by some very peculiar assertions; focussing on the theme that in cutting taxes, one must be relegating teachers and policemen to the dole queue, and rendering hospital buildings to property developers. I have never heard anyone point out the fact that the extra billions of our hard-earned cash being poured into our public sector money-pits is making little or no difference to public perceptions about their efficiency and effectiveness, thus in the same vein, it is hardly likely that reducing their budgets will have a radically negative effect.

    However, I happen to think that there are many other areas of public spending that are completely unnecessary. It’s quite sobering to realise that if the government were to perform a supermarket-style “rollback” of public spending to 2001 levels, Income Tax could be abolished. Think of the cost of the unnecessary quangos, regional assemblies and other government bodies that have been created over the years; none of which contribute anything towards the security of our country or its citizens, which after all, is the primary purpose of government.

    In fact, I’d like more than tax cuts. A wholesale reform of the tax system would be preferable. Margaret Thatcher stated quite succinctly that running a country is like running a household, i.e., spending must be less than income. So let’s reform the tax system to simplify it, and to let hard-working people keep more of their own money. We need to challenge the endemic culture of tax and spend. We all know about the public sector culture of running down their budgets every year when approaching the financial year-end. We know that there is no incentive to under spend, as they will be rewarded with a budged cut the following year. This breeds a culture of waste, and it needs to change.

    We need incentives to lower costs. One of the best ways of doing this is to introduce tax competition (an alien concept in a centralised Britain). Local authorities should be entirely responsible for raising their own money through local sales taxes. The rate would vary in each authority, prompting consumers to make their purchases in the lowest tax regimes. Thus, we can harness the power of the market to incentivise lower taxes, and a culture of thrift will become institutional. Such a local sales tax would replace VAT and Council Tax. This would probably result in an initial tax rate of around 22%. However, the aforementioned effects would see the rate reduce over time. Business compliance costs would reduce as a sales tax is far simpler to administer than the insane VAT system.
    However, such a policy, while sensible, would be illegal under EU law, as VAT is an EU mandated tax. If we stopped paying the EU ten billion pounds annually, we could abolish Inheritance Tax and Capital Gains Tax at no cost.

    Thus, we are confronted with inescapable facts whenever even modest reform is contemplated: that we no longer govern ourselves. Our politicians have no room for manoeuvre in policy initiatives of this scale; they’re reduced to tinkering at the margins, and those margins are getting smaller. This gives rise to the perception that most politicians in Westminster display a greater level of deference towards our incompetent government in Brussels, than they do towards their own electorates. It’s up to you to prove us wrong.

  8. David Eyles
    Posted April 29, 2008 at 1:23 pm | Permalink

    Its a good point. Pollsters are only as good as the questions that they are prepared to ask. At the moment, the only EU question asked is about whether or not we should have a referendum on the Lisbon Treaty. And thats it. Nothing about whether we should renegotiate our relationship with the EU. Nothing about whether we consider the EU to be good for democracy or not. Nothing about whether we think the EU is sinister or a force for the good.

    Likewise, questions about our feelings about our liberty and freedoms. Many, many people are now starting to voice concerns which centre around the idea that we are turning into a police state. Not just just rampant, dyed-in-the-wool retired colonels, but people from all walks of life are begining to raise these fears.

    The recent raising of the immigation issue has happened not because pundits and pollsters have asked questions of the public, but because of a tiny number of brave individuals and organisations such as Migration Watch have voiced fears which increasing numbers of ordinary people have. If it was left to the pollsters, this issue would not even have been raised. Only well after the issue has hit the headlines and starts to be widely discussed on the media, do the pollsters start to find out how the public are thinking.

    Why are the pollsters so backward? I think that pollsters are too close to the political establishment and are only asking questions that the politicians want them to ask. The result is that vital issues about our future are not being brought to the attention of the politicians because the politicians do not want to consider them. The result is an increasing isolation and arrogance of the politcal class and the destruction of our national identity and sovereignty.

  9. APL
    Posted April 29, 2008 at 1:58 pm | Permalink

    David Hannah: "We need incentives to lower costs. One of the best ways of doing this is to introduce tax competition (an alien concept in a centralised Britain)."

    "Unfair tax competition!", I can hear the squawk right now in my minds eye (ear). From all usual suspects across the European Union.

    Tax competition at a European level – we are seeing it already with the move of the first of a few high profile companies from London to Dublin – is a great idea.

  10. Posted April 29, 2008 at 2:00 pm | Permalink

    "Invariably, they don’t. “I want to pay more tax.” is middle class socialist cant" APL, if I may, it is in fact Kant and his misguided moral imperative in practice

    "if the government were to perform a supermarket-style “rollback” of public spending to 2001 levels, Income Tax could be abolished"

    I'm voting for anyone who delivers this

  11. APL
    Posted April 29, 2008 at 5:47 pm | Permalink

    Stuart Fairney: "APL, if I may, it is in fact Kant"

    Of course you may. Although I don't believe I was thinking of Kant the 'philosopher', rather 'cant', a cryptolect, used to disguise meaning from those outside the group.

    PS: I'm with you and David Hannah on the abolition of income tax.

  12. mikestallard
    Posted April 29, 2008 at 9:08 pm | Permalink

    What a lot of wisdom there is above! Good reading!
    We know that lower taxes work. We also know that taxing people half their income, as at the moment, is idiotic. We all know we are mostly governed now by Brussels. We also know that high taxes do not mean better services.
    That, at least is a step in the right direction.

    So why doesn't Mr Cameron say that he understands how we feel?
    1. The Client State which has been carefully built up by New Labour contains a LOT of people. Threaten that, and you will never be elected.
    2. This government is broke and approaching (I think myself) bankruptcy. Someone is going to have to get the country's finances round when Brown gets the sack. That may mean putting taxes right up for a couple of years.

    The risk is that Mr Cameron just seems weak and powerless.

  13. Posted April 30, 2008 at 11:33 pm | Permalink

    Stuart, you may be interested to know that abolishing Income Tax and reducing government spending back to 2001 levels (and beyond) is one of the flagship policies of the newly formed UK Libertarian party. You can check out the other policies at http://lpuk.org/

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page