Friday, 25 July 2008

Why Clegg is right about tax

I keep seeing concerned Facebook messages and letters to Lib Dem News about the ambition set out by Nick Clegg to lower taxes. I've seen the message from the Beveridge Group about this, and Richard Grayson is right that it is a policy shift.

I think I'm on the other side, though. I don't think, and I don't think the Lib Dem pre-manifesto implies, that we should give any less priority to public services. The trouble with simply accepting Gordon Brown's spending levels as they are, without any demur, is that:

1. We have to accept without question his view of efficiency: the unprecedented increase in public spending since 2001, with very little to show for it - because it is delivered centrally, through a target and control system that renders local services increasingly distant and ineffective. Anyone who works in the public and voluntary sector will be aware of the staggering waste of resources by centralised, unaccountable quangos. The truth is that New Labour centralisation is making our public services less effective and this needs to be at the centre of our message. Simply accepting current budgets as they lets the government off this crucial hook.

2. We have to accept without question his white elephants: the £12bn on the NHS computer, similar amounts on ID cards, £70bn just to decommission nuclear reactors, even more to replace Trident and underwrite a new generation of nuclear reactors. And Iraq. Simply accepting current budgets means we have nothing to say about these, except the principle of the ideas - nothing to say about the vast waste of money.

Thrift is a core Liberal value, albeit rather a forgotten one. If we have ambitions about reducing the overall level of tax - and I think we should at the moment - they have to be part of a much larger ambition, to localise public services and make them effective, and to reveal New Labour spending as bogus, destructive and wasteful.

But if we accept their budgets as they are, we can't say any of that.

1 comment:

Tom Papworth said...

David,

I agree, but this is only part of the story. Consider two other, perhaps more fundamental points.

Firstly, nobody, not even Gordon Brown, would start from here. Government expenditure of 45% of GDP will throttle any economy, and borrowing at this level makes fiscal stimulus in these troubled times impossible. If we were starting from scratch we would ask what level of taxation maximises welfare and growth and then move on from there. It has been argued that 20% is the "growth-maximising" level of government expenditure, while "welfare-maximising" is 35%. So even if we want to maximise welfare, every percentage point of GDP that Government takes above 35% is wasted; even the good that government does is outweighed by the opportunity-cost, representing the welfare people could buy themselves with their own money.

Which leads us to the other point. In a "Free Society" (surely the aim of all liberals) Government needs to justify all taxation, and cannot merely rely on the argument that "It is for the common good" or “we can spend it more efficaciously than you” (the classic socialist arguments). What is more, freedom to enjoy the fruits of one’s own labour is vital, the alternative being serfdom (being forced to work on the master’s fields for two day’s a week, or in this case seeing two fifths of one’s salary taken either from one’s salary or at the till). It has always struck me as strange that Liberals have not made the case for maximising freedom through minimising taxation more strongly. It should be fundamental to our being.

Anyway, I’m in danger of making a comment longer than the original post – the cardinal sin! I hope this adds some food for thought, however.

Tom