Magazine article The Spectator

The Great Labour Tax Con

Magazine article The Spectator

The Great Labour Tax Con

Article excerpt

AS Labour spells out its intention to recross the tax-and-spend Rubicon, the Prime Minister appears nothing if not relaxed. Labour won in 1997 because of Tony Blair and the pledge not to put up income tax. Now the Prime Minister openly talks about raising tax to pay for the NHS. Is the Prime Minister's apparent confidence in making the transition from a prudent to a tax-raising government right? Or might this be the issue which begins to put the first gust of wind behind Tory sails?

On the surface the Prime Minister appears well placed. Despite a whole succession of political reversals or, as the jargon has it, communication failures, the government emerges enhanced in the polls. Yet talk about tax increases, even for the National Health Service, is a quite different proposition from having one's income further reduced each month by paying those tax increases.

Even allowing for the select few voters called on by pollsters for their views on increasing NHS funding, the national trend in support of higher taxes was already on the wane before the government made its latest calls for more money. The British Social Attitudes Survey records over the past few years a dramatic drop from 63 per cent support for higher taxes to fund a better NHS to a mere 50 per cent - a fall of a fifth in two years.

It is true that the NHS remains the only institution held in anything like universal approbation. Yet even here criticisms, which would once have been treated like an attack on the monarch, now form part of everyday conversation. The NHS is still well loved but the public is more focused on the warts of an organisation in its sixth decade. Ironically, staking out the ground for tax increases now, after the biggest ever sustained increase in NHS funding, is going to be a more difficult operation than it would have been had tax increases been called for five years ago as a trade-off for hoped-for improvements in the service. It is here that the joins in the government's cobbled together approach on tax-andspend are most exposed. It calls for an open debate on how best to fund the NHS, and yet before the ink is dry on press releases it begins informing taxpayers what the result of that debate is.

When the government says `tax increases', read 'a hike in National Insurance contributions'. Where the public sees a difference between tax and National Insurance, the government does not. From his first Budget the Chancellor spoke of insurance contributions as a tax. The public, on the other hand, sees insurance contributions as going specifically to finance the state pension and to make a worthwhile contribution to NHS funding. What they do not realise yet is that their contributions have now built up the heftiest of surpluses which the government has refused to use to pay for long-term care, or to raise the basic pension. Instead it has creamed off this mega surplus to help finance other expenditure programmes.

The National Insurance Fund, as it is called, is compelled to keep a surplus of one-sixth of its expenditure to ensure that there is always enough cash in the fund to meet possible fluctuations in income and expenditure. That surplus this year stands at almost L8.5 billion. Yet on top of this the fund is now running at an additional surplus of a staggering L15.8 billion, which is set to rise to almost L19 billion next year. …

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