The Conservatives Made Deficit Reduction Their Number One Priority. What Sense Then, Do Tax Cuts for the Richest Make?
by Forgot About Keynes
In interviews broadcast earlier today, both the Prime Minister and the Chancellor refused to rule out a reduction in the top rate of income tax. The Conservatives, as they have made clear at almost every opportunity, are committed to deficit reduction and national debt repayment. Why then would they even have to think about changes in tax rates? If the government is committed to “balancing the books,” it will not make its efforts any easier by forgoing revenues. That is, unless the government is not entirely concerned with deficit reduction after all.
For the past five years, this government has insisted that its policies have brought the country back from the brink of another economic crisis. The coalition made wide ranging cuts to department budgets and privatised Royal Mail and the east coast mainline among other sell-offs. These were “tough choices” that could not be avoided given the massive burden that the deficit and the debt stock presented to the present and future generations of taxpayers.
The basic problem with this narrative of fiscal responsibility however, is that despite its ubiquity, it has been undermined by the government itself. If austerity is about getting the nation’s finances in order and as such making sacrifices in government spending, then it genuinely has to be the case that “we are all in this together.” Why then, has the Chancellor been boasting of the success of its pensioner bond (which will cost the taxpayer hundreds of millions of pounds while being available exclusively to over-65s)? Why then, is this government considering taxing disability benefits? Why has George Osborne just underlined his party’s commitment to taking more households out of the higher rate tax band? How could it plausibly be the case that young and old, rich and poor alike are being treated the same when these are the government’s fiscal policies?
If we take the government’s rhetoric on austerity at face value, we see a coalition committed to reducing its spending and increasing its revenues. If we take its policies into consideration we have a problem however, because a government genuinely committed to balancing its books doesn’t forego the opportunity to tax those individuals and organisations under its jurisdiction that have the greatest ability to pay tax. Given its ambitious targets to eliminate the deficit and begin paying off the country’s debt, the last thing that should be expected of the government should be for it to be protecting its wealthiest from austerity while removing the safeguards of the poorest in society. And yet that is exactly what this government has been doing for the past five years.
GETTING AWAY WITH IT
Imagine a Labour government that came into power on the back of pledges of fiscal responsibility that acted with such abandon. Ed Balls and Ed Miliband are committed to eliminating the deficit as well, as it happens (though they plan to do it more gradually). What would the Conservatives and the right wing press think then, of a Labour government that then proceeded to return the top rate of income tax to 50 per cent, while reducing tuition fees, bringing back the EMA and freezing public sector cuts? They’d be predictably outraged and cry hypocrisy … and they’d have a point, because a government committed to reducing its share of national spending doesn’t just talk about it, it does it. It doesn’t proclaim a failure to meet its core policy targets a success.
The deficit is down, but it hasn’t been eliminated. The national debt is only rising. By all accounts, we are not all in this together. The UK is the only member of the G7 where wealth inequality has increased since 2000. Pensioners and the wealthiest in society are among the few that have emerged at this parliament’s end better off than at its start. The country’s young do not bear any less of a national debt burden than they did before and thanks to the Conservatives and the Liberal Democrats, now pay £9,000 for university tuition.
By all accounts, this government seized upon the economic concerns of the electorate and exploited those worries to make the rich richer and the poor more insecure than they have been for some time. And in the name of what? The Conservatives are barely any more electable now than they were five years ago and the Liberal Democrats have sacrificed a great deal of their electoral support.
THE UK VERSUS GREECE
The Greek government had austerity imposed upon it by the IMF and the EU. George Osborne freely reshuffled the fiscal deck to bolster the fortunes of his party’s core voters. A country that freely changes its fiscal policy is not a country in imminent danger. A country that makes cuts to certain departments while fencing off other budgets is not a country in imminent danger. A government that presides over a population resorting to rioting, constant protest and a proliferation in food banks is not a government that sees all its subjects as equal. This government put looters in jail for stealing bottles of water and bags of rice while fighting to protect its bankers from an EU cap on bonuses.
The final and essential point to make is this: if the UK government needs to spend, there is nothing in principle that is stopping it from doing so.
Taking the coalition line on austerity at face value – that there was no other option than to make immediate spending cuts in 2010 – necessitates a pragmatic, evidence-based, impartial approach to deficit reduction. If money is tight, then it has to be the case that cuts are shared and that everyone chips in equally.
There’s always enough money, though. There’s money for HS2 alongside cuts to local government budgets. Former residents of council housing in Newham may be on their own, but ‘money is no object’ when David Cameron’s constituents need rescue. There’s no end to public funds for a top-down reorganisation of the NHS or a wholesale restructuring of the benefits system. There may be a shortage of housing in almost all urban areas but renovating the Palace of Westminster will be assumed an urgent priority and the funds will no doubt be made available. The coalition may take a hardline on public spending but when it needs to protect its political future, it will not hesitate to spend everyone’s money to stay in power.
If there is no alternative to austerity, there are still political choices to be made as to which spending plans to change. This government chose to make the disabled and the poorest more insecure while ensuring that pensioners and the rich were well-looked after. If there’s one thing this coalition has taught us, it’s that we should never believe a government that tells us it has no choice but to embark upon a certain set of plans.
The Greek government, which this coalition has too often got away with comparing itself to, continues to show us how a country genuinely in crisis behaves. The Greeks have implemented austerity as a last resort and have sought to protect their people from its effects. This coalition government has chosen austerity as a first choice and implemented it selectively and patchily.
If it can find hundreds of millions in taxpayers’ money to enrich its pensioners, this government didn’t need to tax spare bedrooms after all. If it can even afford to think about reducing the burden of tax on the richest, this government doesn’t need to tax disability benefits. The UK is not Greece and if “tough choices” have been made, they haven’t affected everyone equally; that much should be glaringly obvious by now.