FAMILIAR stereotypes are being trampled underfoot in the debate about
which is the ''low-tax'' party. The Conservatives conspicuously failed
to live up to the expectations aroused by their election campaign, but
the notion dies hard that they are, at least in relative terms, the
low-tax party. Not everyone would have instantly challenged Mr Major's
claim that the rate under Tory Governments is consistently lower than
the level when Labour is in office. The Treasury, however, has shown
this assumption to be quite wrong: the then Mr Healey was a lower-tax
Chancellor than all but one of his successors, albeit only during the
period preceding the 1979 General Election. The Treasury figures provide
an interesting corrective to received notions, but the argument will
become sterile if it is confined to the level of taxation rather than
its spread and if it takes no account of economic circumstances or the
demands on the public purse.
There is no ''low-tax'' party: nor would this necessarily be something
to boast about if there were. Mr Clarke is right to insist that he has
to impose whatever tax is necessary ''to get us more jobs and more
growth'', provided that is actually what the Government is doing --
which is questionable, given the absence of a convincing strategy for
capital spending. A realistic level of taxation has also to be set if
services and social welfare are to be kept at the level that the public
clearly wants. A slanging match about percentages is therefore of
limited value. The main question about the tax burden that will be felt
from April onwards is not whether it is heavier or lighter than the
Healey imposts but whether it is heavier than the economy can bear. Mr
Beith claimed yesterday that the increases are too big a gamble for the
fragile recovery, but he implied that was at least in part because they
were not being used to fund productive investment.
We would agree with that last point, but the tax level does not in
itself seem excessive in relation to the country's needs and the urgency
of reducing the budget deficit. The real question is about the way the
taxes are being raised, and in particular whether the balance of direct
and indirect tax is fair. It is here that the Government's fiscal
policies are most open to question, their preference being for indirect
taxation, with VAT on fuel providing an exceptionally unpleasant example
despite the compensation package.
Once again the stereotypes are suspect since it appears that even when
it comes to direct taxation voters will from April be paying more than
they did under Labour in 1979; but the thrust is regressive -- a freeze
on the level of the personal allowance rather than an increase in the
higher rate. It is on this point that political debate should be
engaged, and it is a pity that Labour does not yet feel on firm enough
fiscal ground to do so, preferring the easier course of puncturing the
Conservatives' low-tax pretensions -- a legitimate target, of course,
but a limited one, and perhaps a receding one in view of the expected
pre-election cuts.
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