Setting an equitable price for joining a fair, civil society

October 16, 1998

Will Labour raise taxes in its second term in power? Raymond Plant will be among the first to know. Huw Richards reports

Raymond Plant does not particularly enjoy speaking in the House of Lords. As a political theorist who tries to argue on a basis of principle when he makes his interventions from the Labour benches - often to a sparsely attended House - Lord Plant finds: "I sometimes feel as though I am speaking to myself."

Plant, master of St Catherine's College, Oxford, is however guaranteed an attentive audience over the next year as he chairs the Fabian Society's Commission on Taxation and Citizenship.

Labour's pledge not to raise income tax during its first term in power stifled in-party debate on this vexed issue. Plant, who joined the party as a Grimsby schoolboy and nearly went to work for it after graduating, has no quarrel with the party's manifesto promise to keep tax rates at their current level. "Labour had to re-establish its credibility with the electorate," he says.

But Plant's committee, which plans to report before the end of 1999 - well before an election is expected - is looking towards a second term in which this pledge does not apply. "As we move towards the next election, the question of whether to raise tax will inevitably become an issue. We won't be criticising government policy - there is no policy as yet on this issue for the second term. And the context is very different from before the last election. Labour will go into the next election with the credibility provided by five years in government."

While the political parties conduct Dutch auctions over income-tax rates, Plant says that the debate needs to be cast more widely. "There are fundamental problems with the taxation system. In the past 20 to 30 years governments have relied on a series of short-term sources of income to plug the gaps. They can't go on forever in this rather Micawberish fashion, hoping that something else will turn up to keep them out of trouble."

The committee's recommendation on the standard rates of tax will probably dominate headlines, but Plant points to other crucial issues: "We need to decide whether 40 per cent is high enough as a top rate and also to look carefully at the other rates. It is a big step from the standard rate of tax of 24 per cent to the top rate of 40 per cent, which affects people earning about Pounds 30,000: Pounds 30,000 isn't a massive income nowadays. We have to look at whether that is the right level for that rate to start."

The commission will also examine business tax. British corporation tax rates are low by international standards, and technology has created problems. "A big question is how you tax the large amount of business transacted electronically. This makes it hard to track money."

Other issues to be considered will include the role of local and regional taxation and the question of how far taxes can be hypothecated, or explicitly dedicated to specific purposes. Plant has argued that the direct connection between taxes and services created by hypothecation is one way of increasing the public's acceptance of taxation.

Here, perhaps, is the Labour government's key to its knotty problem of how to "sell" higher taxes. Plant argues that the drive to lower taxes just for the sake of doing so is a legacy of Thatcherism that the centre-left must shake off if it wants to conduct politics on its own ground. He cites John Maynard Keynes's dictum that tax is the subscription fee for a civilised society and points to the citizenship element of the inquiry's title.

Plant was always a Labour revisionist, happy to argue that the market was an indispensable element of a succesful economy when this view was unfashionable on the left. He now argues that market criteria have become too dominant in politics: "The market will generally deliver a service more cheaply than other means, but our sense of what constitutes value has become too narrow." An example? "Labour was wholly opposed to private prisons when we were in opposition. The reason for the change of mind now that Labour is in government is simple. Private prisons are cheaper to build and maintain. But is that the only test we want to apply?" Nevertheless, Plant sees some indications that ministers will start to recognise broader criteria - noting the likely impact on public attitudes of rising numbers of people who must care for aged relatives. "They will realise how difficult and expensive it is to provide high-quality healthcare out of purely private resources," Plant says.

Whether or not the commission paves the way for more positive attitudes to taxation and public services, its chair does not expect any political preferment. He has no desire to be a minister. "I'd be terrible at it. I lack the day-to-day political skills, and I'm too thin-skinned. It is impossible to be a minister and an academic at the same time."

COMMISSION MEMBERS

Fran Bennett,former director of Child Poverty Action Group; Jonathan Charkham, former adviser to governor of the Bank of England; Ruth Evans, director, National Consumer Council; Paul Johnson, deputy director, Institute for Fiscal Studies; Roger Jowell, director, Social and Contemporary Planning Research; Julian le Grand, professor of social policy, London School of Economics; Peter Lehmann, commercial director, Centrica plc; Jim McAuslan, deputy general secretary, Public and Commercial Services Union; Elizabeth Meehan, professor of European social policy, Queen's University, Belfast; Sir Nicholas Monck, second permanent secretary (public expenditure) of the Treasury; Stephen Nickell, professor of economics, LSE; Brian Pomeroy, senior partner, Deloitte and Touche Consulting; Holly Sutherland, director of microsimulation unit, Cambridge University; Wendy Thomson, chief executive, London Borough of Newham.

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