Let Michael Caine leave. Fairer taxes must be made to stick if we're to avoid the cuts in services Cameron has in mind
It's more than a week since Alistair Darling's budget, but the howls of protest haven't stopped for a day ever since. That's not been the public sector employees facing a harsh squeeze on jobs and pay who've been squealing, or the million workers expected to join the dole queues in the next year, or even the majority or people who will have to stump up another half per cent of national insurance contributions every month. No, the outrage has come from the richest 2% of taxpayers who are going to have to part with 50% of earnings over £150,000 - and personal allowances over £100,000 - and later stand to lose top-rate tax relief on pension contributions.
Never mind that the wealthiest taxpayers will still be contributing to the public purse at a 10% lower rate than for nine of Margaret Thatcher's 11 years in office, or that six of the richest OECD countries have higher rates. From the Mail to the Financial Times, a crusade has been joined against the new 50p tax. This is nothing but a "fiscal lynching", it's claimed, a "spiteful" display of the "age of envy", and a disastrous outbreak of "class war". Sir Richard Branson, whose business empire is ultimately owned in the Virgin Islands, insisted that 50% would be a "block on the next wave of entrepreneurs".
Right on cue, just as when the government tried gently to bring the non-domiciles into the tax system, there has been a stream of threats of a City exodus to Monaco and the Channel Islands, with the faltering Punch Taverns businessman Hugh Osmond and the Tory curmudgeon actor Michael Caine heading the queue. Even Stephen Byers, the former industry secretary and spokesman for disgruntled Blairites, has denounced the new top rate - though he has form, having also called for the abolition of inheritance tax a couple of years back.
Whether the failed bankers and financial derivative merchants who have brought the economy to its knees will be greatly missed if they do decamp to the Channel Islands seems doubtful. But the naked class egotism and sense of unchallengeable entitlement on display in the last few days from those who have benefited most lavishly from the corporate and executive bonanza of the last 30 years has been a timely reminder of the vested interests that dominate British society. So has the shrill endorsement of their media supporters, just as opinion polls have shown up to 68% backing what is by any objective standard a modest measure.
Now the campaigners against fairer taxes have done a hand-brake turn and complained that the new 50p rate will, in any case, hardly raise any revenue, as the wealthy will simply reclassify their income as capital or switch it into pension contributions. Now, clearly, the 50% tax can't both be a fiscal lynching and an ineffective waste of time. But this is a more serious criticism, partly acknowledged by Treasury officials on Tuesday - when they conceded the tax might only raise around £1bn as a result - and made worse by a new hamfisted pensions tax relief loophole created in the budget, which will in fact temporarily increase relief for the richest.
But the obvious answer to loopholes that undermine progressive taxation - estimated to cost at least £25bn a year - is simply to close them, and crack down on the tax avoidance industry that exploits them at vast public expense: 50% must mean 50%. Given the fiscal hole that Britain is now in, that's essential to raise revenue. But it's also necessary for social justice. As the remarkable research in Richard Wilkinson and Kate Pickett's book The Spirit Level demonstrates, more equal societies consistently deliver advantages for the whole population: from better physical and mental health, less crime and smaller prison populations to lower rates of teenage pregnancy and obesity, and higher rates of literacy and social trust.
Of course, a serious move towards a more equal society is going to take a lot more than income redistribution. But it is a case that ministers - who have presided over widening inequality partly because they have, until now, refused to cap the income gap at the top end - still refuse to make. The result is that the Tories, the City and their media cheerleaders have managed to turn the most cautious of necessary reforms into a public indictment - while shifting the political agenda from tax and the banks' responsibility for the crisis to public debt and the prospect of savage cuts to the welfare state.
That is the Tories' traditional comfort zone, but the government has paved the way for the shift by loading the burden of reducing the budget deficit on to future spending cuts rather than a fairer tax system. The idea that public spending is out of control is, as the City analyst Graham Turner argues, in any case nonsense. Current government spending actually fell in March in real terms, when unemployment and social security payments should be pushing it up. What is fuelling the deficit is the slump-driven collapse in tax revenues, which dropped by 12% in the same month.
Part of the obvious answer, rather than bleeding public services, is to broaden the tax base - currently only 35% of national income, the lowest it's been for half a century - and make those who caused the crisis pay their way. That could include taxing financial derivative and stock market transactions, land, wealth and corporate turnover - as well as closing the avoidance incentive of lower-rate capital gains tax. Scrap identity cards, the Trident nuclear upgrade, and the planned new aircraft carriers, while taking full control of Britain's zombie banks, and you start to have the elements of a very different route to the now looming assault on public services.
Gordon Brown's government is finally being driven, inch by inch, to carry out some of the most basic progressive measures it should have taken years ago - even as ministers continue to push through retro privatisations and dissipate last autumn's political recovery with self-inflicted wounds. Labour has long expected electoral meltdown in next month's Euro elections, and the default assumption must be that all incumbent governments face electoral defeat during such a crisis. In Britain, just as the political cycle that began 30 years ago with Thatcher and Ronald Reagan comes to an end, their political successors paradoxically stand to reap the rewards of what is bound to be damned as 13 wasted years. But the battle over who pays for the crisis now can still shape that outcome - as well as the scope for a real alternative thereafter.
Copyright Speakers Corner 2017