Subscribe to the Compass feed
Join the Compass Facebook group
Follow us on Twitter
EVENT
After the election: what next for centre-left politics?
CAMPAIGN
High Pay Commission
PUBLICATION
The Advertising Effect
THINKPIECE
#60 Responses to Recession
Compass warmly welcome Labour's radical tax reforms
Compass has welcomed plans due to be announced in the Pre-Budget Report to reduce VAT and to introduce a new top rate of tax on the super-rich. A recent letter to The Sunday Telegraph co-ordinated by Compass specifically called on the government to pursue similar fiscal measures in the economic downturn and Compass has long advocated a New Political Economy.
Today heralds a clear change in direction in government economic policy and this should be warmly welcomed. The steps announced will help to restructure the tax system and make it fairer for the vast majority of tax-payers across the country.
Reducing VAT is a positive step as it is a socially regressive form of taxation that disproportionately hits those on lower incomes more greatly. Whilst increasing the top rate of tax on those earning over £150,000 is absolutely the right move, ensuring those at the top pay their fair share. For far too long the super rich have paid proportionately less tax than those on lower and middle incomes. As well as the economic arguments there is also a profoundly moral case for taxing the most wealthy in society more, particularly given many of the current economic problems were caused by a culture of greed and risk at the top, so it is good to see the government are taking pragmatic steps to tackle such moral hazard.
Fundamentally these measures mark a break away from the Neo-Liberal economic consensus of the last 30 years - an economic policy that put much greater emphasis on indirect taxation, whilst allowed those at the top to pay proportionately less tax than those on lower and middle incomes. Significantly today's announcements, when coupled with David Cameron's ditching of Labour spending plans last week, mark a clear political divide in British politics.
Tomorrow night Compass will convene a special meeting in Parliament to discuss the Pre-Budget Report and the future of the economy: ‘After Market Meltdown: a new age for the active state?' starts at 6pm on Tuesday 25 November and takes place in Committee Room 11 in the House of Commons. Speakers include: Treasury Minister Angela Eagle MP; Jon Cruddas MP; The Guardian's Larry Elliott; nef's Andrew Simms; author of The coming first world debt crisis Ann Pettifor and chaired by Compass Chair Neal Lawson.
Neal Lawson chair of Compass said: "Today's Pre-Budget Report marks a move away from the Neo-Liberal/free market economic consensus pursued by both Labour and Conservative governments of the past 30 years - but this should not just be a blip before normal service, in the shape of speculative consumer capitalism, is resumed - the government needs to make this a turning point that leads to the moral transformation of our society".
Jon Cruddas MP said: "This is exactly the kind of measure that we've been advocating for a while now and it's good news for people like my constituents in Dagenham. This should be the first stage in re-balancing the tax system so it's fairer for middle and low income earners, as well as kick-starting the economy in the short term. When the new US administration takes office then we have the chance to move in to another phase - an international crackdown on corporate tax evasion. Meanwhile, Cameron is now retreating from New Conservatism into orthodox Thatcherite economics and we have to expose that."
Gavin Hayes General Secretary of Compass said: "A financial crisis that was in part caused by the excesses and risky behaviour of those at the top should not be allowed to unnecessarily hurt the rest of us, so today's announcement on reducing VAT, whilst at the same time announcing plans to increase the tax burden on the super-rich should both be welcomed, it is absolutely right for government to limit the impact of the recession by using pragmatic and sensible measures such as these."
For more information: call Gavin Hayes on 07900 195591 / Neal Lawson on 07976 292522
Want to write an article like this? If you’re a Compass member you can submit your own articles and start your own debates on the Compass debates member’s section, an autonomous space for our members to initiate debate and discuss ideas.
To keep updated on the latest Compass news, please join our mailing list.
Comments
on 27 November 2008, 4:40:23 PM
In my view Compass should be asking the government to look again at Trident, ID cards and Afghanistan - we shouldn't pay for the mistakes of the city by putting the squeeze on schools, hospitals and services - and forcing local government to put up the council tax is similarly unfair.
on 26 November 2008, 11:16:50 AM
That's not democratic politics, it's feudalism. Those who "warmly welcome" this PBR, and without any qualification, send a clear signal to Gordon Brown - in fact the same signal that has been consistently sent to New Labour for 11 years. "Give them a sop and they'll be happy".
Trouble is that we are no longer in any position to play this nice upper-class parlour game. This country is faced with its biggest crisis in 70 years, and there is no longer any space for manoeuvre, no tolerance for error.
Brown is, I believe, setting us on a course for disaster with this PBR, in that it demonstrates a total lack of understanding of our situation and our people, and he continues to be in denial that his (and New Labour's) philosophy is a fundamental cause of the crisis. He is pathologically incapable of admitting that he is wrong.
The "warm welcome" reinforces that denial. The "warm welcome" is a bad strategic and tactical error.
on 26 November 2008, 10:47:15 AM
The fact is Labour are fighting for their lives right now the biggest ever down turn recession call it what you like.
If this goes wrong then sadly Labour will be looking at a very very long time time sitting in the corner of Parliament.
What a mess, Labour says they will put VAT up to 18% in 2012 then stick it on the Internet, then has to say nope thats old it's a mistake, for god sake if it's a mistake why not shred it.
And now what! councils to think about charging for taking away our rubbish, what was the council tax for. street lights being turned off. but most people in the world do not pay a council tax our council tax has always been for the bin man cleaning out streets, so whats the matter now not enough fines .
Jesus what a mess this government better get it's act together because people are getting angry.
on 26 November 2008, 5:21:19 AM
on 25 November 2008, 3:01:58 PM
Whoever wins the next election, the post 2010 tax burden will fall where it always has: on the middle-income and low income tax payer; on pensioners and on those without work. As for those with incomes of £140,000 it is right that they should pay more income tax. But many of these people have in fact a degree of flexibility and discretion about precisely where the £140,000 threshold begins and therefore about how much income tax they actually pay. These same people have the added windfall of paying less VAT on their purchases: purchases that are typically of higher value than the great majority of the population.
The supportive stakeholder democrats in the media, policymaking and the privatised civil and economic society, called into existence by Brown and the rest of ‘new labour,’ remain in place. - As this egregious piece from Compass exemplifies.
It is not unreasonable that ‘new labour’ cheerleaders should add claims of radicalism to the now traditional insistence that neo-liberalism is done for. But if these claims were remotely credible, Labour would be pursuing policies other than those set forth in the Chancellor’s Statement.
Radicalism by current Labour standards would have included a clear and long-term role for the partially nationalised banking sector; a related long-term role for public investment in rented housing and manufacturing industries. It would have included closing tax and pension loopholes exploited by the rich. It would have included recompense for the one million working poor that are still carrying the burden of the 10p tax fiasco. It would have included lifting many more of the working poor out of income tax; or at least radically reducing their tax burden.
Instead all it has done is raised a reflex cheer on the Labour back benches and created enough of a difference with the Tories as will make a Lib Dem coalition with the Tories less likely. Astute Labour neo-liberals will doubtless see the essentially Rightwing anti-Tory basis upon which the Lib Dems might be brought into a coalition with Labour. - Brown’s plan B. A plan B which had ceased to be likely with the removal of Ming Campbell; but which is now at least possible given the Lib Dems unequivocal denunciation of the Tories own proposals.
on 25 November 2008, 1:43:59 PM
This is very close to suggesting that symbolism does, after all, butter parsnips, Gavin... that is, if you are one of those people who can afford parsnips in the first place.
on 25 November 2008, 1:39:14 PM
won,t make the slightest difference.
on 25 November 2008, 12:59:42 PM
on 25 November 2008, 12:21:24 PM
Hope this doesn't undermine the support you are receiving.
As for Mike Prior's metaphors, the one that his comment brings to my mind is a glass that is always half empty.
on 25 November 2008, 9:21:56 AM
What has it done for the poorest nothing, the welfare state is heading into a travesty of forcing people onto JSA and without a chance of them getting a job. people now going on the dole will be hit the hardest but then again New Labour has no intention of worrying about them get a bike mate and get on it.
I was listening to the radio when an MP stated we have 650,000 jobs in the UK and he could not understand why people were not taking them, perhaps because they do not excised.
The fact is this could have been a real Labour change but he has protected his rich chums and told us enjoy the next two years because your going to spend perhaps a life time repaying this debt, but do not worry once I've had my next term in power I will leave and live on a pension.
Vote Labour my ass
on 25 November 2008, 6:41:50 AM
A temporary cut in VAT will, if anything, boost the sales of imported goods whose prices have already risen by more than 2.5% as the pound has declined. It fails to help fuel and food bills which do not attract the top rate of VAT.
The future small increase in income tax for those earning over £150,000 is really just a sop towards reducing inequality. Brown has obviously bought the idea that immediate income tax cuts or direct monetary stimulus is mostly saved rather than spent. But is not saving a perfectly rational move for those with large credit card debts and the possibility of redundancy in the New Year?
It is unclear just how much of the increase in infrastructure expenditure is both new money and will actually occur in 2009. The promised £800 million on schools, for example, is based on bringing forward committed projects largely to be financed under PFI initiatives. I see no signs of any backtracking on PFI financing. Nor is there any sign of new thinking on how the government proposes to use its shareholdings in banks to promote any new structure to the financial sector.
The really central economic issue facing us is this: the financial and retail sectors have been the main beneficiaries of economic growth in the last 10 years. Manufacturing employment has dropped as fast under New Labour's economic growth as it did in the recessions of the early 80's and 90's. (Ironically it actually rose slightly in the last years of the Major administration). Over 1 million jobs disappeared.
Financial services and retail are going to collapse in the next couple of years, probably permanently. Unless the government can devise measures to stimulate growth in manufacturing we are going to become locked into a long-term slump.
Any sign of such measures might have been a mark of a break with neo-liberal economics but there was none.
Neal Lawson wants to see this as the first swallows of summer but I am afraid that a better metaphor is the straws at which drowning men clutch.
on 24 November 2008, 11:45:40 PM
The Tory analysis is right but their reflexive prescriptions - protecting the rich at any price, tax cuts at any cost - will lose them the next election. Cameron lacks the bottle to fight back the idiots who've lost the Tories three elections already so the election is Brown's to lose in 2009. But, of course, he won't have the bottle either and he'll hang on and go down in 2010 leaving an interestingly hung parliament. From now on, if the LibDems are sensible, they will let Vince Cable make the running, and the SNP wll be in pole position in 2010 to punish Labour in its heartland while the Libdems punish the Tories in its English fastnesses.
Interesting times. Wasted opportunity. Let's hope Obama does better by the American people.
on 24 November 2008, 10:21:23 PM
A decrease in VAT ? When the majority of one's budget is taken up with utility bills and food , how does that help ?
A better solution would have been the raising of the Personal Allowance for Income Tax purposes to , say , 40% of the Average Wage ( £ 450 ... making £ 160 per week without paying Income Tax ) with a corresponding decrease in the Tax bands to ensure that the lowest paid would have benefited ...... inflation for most at this level is still inj excess of the published figure !
So much for equality ....... low paid , single , workers have been thrown scraps from the scraps yet again. Carers \ disabled ? Same as usual ... totally ignored.
And , Compass welcomes today's measures ?
on 24 November 2008, 7:30:54 PM
on 24 November 2008, 7:29:58 PM
"Reducing VAT is a positive step as it is a socially regressive form of taxation that disproportionately hits those on lower incomes more greatly"
Really ? A 2.5% cut for a year will almost certainly not be passed on by retailers because the cost of relabelling and reprinting and updating computer systems will be too great for just a year of tenure. The amount is tiny compared to the 20% or so cuts retailers have already made. Does anyone really believe that people are going to rush out to buy a suit just because the price goes down by £2 ? This is cloud cuckoo land. The only people who will be encouraged to buy will be the millionaires who will save half a million on their next yacht.
"... increasing the top rate of tax on those earning over £150,000 is absolutely the right move, ensuring those at the top pay their fair share. For far too long the super rich have paid proportionately less tax than those on lower and middle incomes. "
Really ? Vast numbers of people earning over £150,000 a year are currently exempt from paying tax via their non-dom status or because they offshore their earnings. You could increase tax rates to 450% and it will not affect them at all. Revoking non-dom status and and banning offshore companies from trading (DIRECTLY OR INDIRECTLY) in the UK would raise far more revenue than this derisory increase in tax rate. The tiny number of people who end up paying this increase produce a negligible increase in revenue; in any event, I believe this government has absolutely no intention of ever implementing this rate increase, even in the unlikely event of their re-election.
"Today heralds a clear change in direction in government economic policy and this should be warmly welcomed. The steps announced will help to restructure the tax system and make it fairer for the vast majority of tax-payers across the country"
Really ? The VAT change only lasts for a year, so no change in policy there. The 45% tax rate is negligible, it won't come in for two years if ever. These two changes reflect absolutely nothing related to a "government economic policy" - they are simply an anodyne response to a crisis.
"Fundamentally these measures mark a break away from the Neo-Liberal economic consensus of the last 30 years - an economic policy that put much greater emphasis on indirect taxation, whilst allowed those at the top to pay proportionately less tax than those on lower and middle incomes"
Again, this is transparent nonsense for the reasons I have given above.
The PBR is almost entirely irrelevant to the moment. Even if one were to accept the government's kill-or-cure philosophy, this PBR just does not address the problems they claim to be addressing. This is a negligible stimulus to spending or investment.
And for this farrago of a panic reaction we are going into ever-increasing debt FOR THE NEXT FIVE YEARS ???? Even the naif Darling concedes that our public debt will reach 58% of GDP, the highest in our history; so we can be certain it will be much higher than that.
Iceland is a bankrupt country, I always thought that Ireland or Zimbabwe would join them before the UK. Now I'm not so sure.
on 24 November 2008, 3:01:32 PM
Leave a comment