14.04.2010

A taxing dilemma

The dispute over taxation shows the bourgeois establishment's poverty of ideas, argues James Turley

As the election campaign gets into full swing, many of the initial exchanges have all been linked to one issue - changes to the Britain’s tax system.

The first flashpoint came out of the recent budget - Labour plans a small hike in employers’ national insurance contributions, as a first step towards cutting the substantial national debt - which the Tories have threatened to kill upon taking office, should they manage to do so.

The Tories themselves, meanwhile, who have looked increasingly uncomfortable with their previous ‘slash and burn’ rhetoric as polling date looms, have announced several tax cuts - not just the reversal of the NI increase, but also tax breaks for married couples (the 21st century Cameroon twist is to extend this to homosexual civil partnerships) and cuts in inheritance tax.

The arguments over taxes, however, like so much else in this election, amount to little more than presentational squabbles - as a closer look at what is on the table, and the back and forth over policies, attests.

National insurance

Gordon Brown and Alastair Darling pitched their 1% hike in national insurance somewhat sneakily. It is to make the first dent in the substantial budget deficit, raising - according to probably over-optimistic treasury estimates - £6 billion over the next year.

The Tory response was simple in its message - NI contributions are paid by businesses on an employee by employee basis, and so a rise in NI amounts to a ‘tax on jobs’. This would surely frustrate any attempt to get unemployment under control, by acting as a disincentive to hiring new workers. Labour’s response has been to subtly shift the ground in the argument from the Tory-friendly terrain of tax policy to that of the need for economic stimulus measures. Any reversal in their NI increase, according to Brown and Darling, amounts to taking £6 billion “out of the economy”.

In reality, it is difficult to imagine that the boffins in the treasury were unaware that NI increases hit the payroll. It has all the hallmarks of a difficult compromise situation, in which reviving the state budget is necessary to stimulate the economy in any meaningful way. This is not, in the last analysis, too far wrong - the truth is that, for many decades, the state has plugged innumerable gaps in economic activity.

Basic infrastructure, after all, is not particularly profitable in itself, but is necessary for profit to occur at all. The state, therefore, makes sure enough money is available to keep the roads and railways (just about) ticking over. State contracts to private companies come in an enormous variety of forms, particularly in the formerly public industries privatised in the Thatcher-Major era. (Privatisation never saved any government a penny - it simply added another circuit to the capital invested, whereby it could be skimmed by spivvish ‘entrepreneurs’.)

As if that was not enough, the public sector at the present time directly employs an enormous number of people. While Cameron and other flag-bearers of ‘efficiency savings’ are disingenuous rather than wrong to indicate that a large amount of this activity consists in duplication of labour and other instances of bureaucratic waste, the notion that ‘painless’ efficiency savings can be found by slashing government departments is simply wrong. It inevitably means job losses, which means less money in people’s pockets, which means less consumer spending (but more people on the dole), etc.

These are the kind of complaints it is easy to sweep under the carpet when an election is at stake. For the Tories, the implicit identification of economic activity with the state told voters all they needed to know about Labour. Shadow chancellor George Osborne’s most astute move in this dispute was to organise a series of statements in protest at Darling’s plans by businessmen, who unsurprisingly objected to money being taken out of their pockets. The Tories have managed to get no less than 80 capitalists signed up to their campaign, the largest fish being Marks and Spencer bigwig Stuart Rose.

This is not necessarily the view of the so-called ‘business community’ as a whole, of course. The Liberal Democrat shadow chancellor, Vince Cable - not exactly a man of the left - has joined the Labour Party in criticising the capitalists involved, calling these pampered CEOs “nauseating” in an interview with The Guardian. The Tory battle cry - ‘Does Gordon Brown think he knows more about job creation than the job creators themselves?’ - calls forth its own answer: yes! The capitalist state’s long-term function is to rule in the interests of the system rather than capitalists as capitalists, whose interests are invariably sectional and focused on their own wallets. The jobs of Gordon Brown and Alastair Darling, in the last analysis, require them to know more about employment, profit and the rest than capitalists - and so will the jobs of leading Tories, should they win the election.

Tory plans

The Tories’ own plans for tax cuts, meanwhile, have increasingly come under scrutiny. David Cameron has long planned to ‘recognise marriage in the tax system’, which in practice means a tax break. The policy has now been fully fleshed out, and the rather insubstantial cut (a few hundred quid over the year) has finally been properly costed. It is to be funded - wait for it - by a levy on the banks.

It is politically impossible, of course, to marshal the support of the population through the support of bankers - but one still almost wishes Alastair Darling were to mirror Osborne’s move and find a substantial list of high financiers to spit blood at the proposal (since the treasury owns a substantial portion of the banking sector, Darling must certainly have enough rolodex entries to do the job). What is the difference between M&S and RBS, after all? Only that RBS, like all the banks, is required in some form to provide credit to other businesses, which is far more fundamental to the needs of capitalist economic activity than the availability of dull clothes and more-or-less edible ready meals. Everything Osborne throws at Darling applies - with interest - to his own plans.

If that is not brazen hypocrisy enough for one policy area in one week, it is only necessary to place the dispute in the context of the last few months. Darling, remember, imposed a one-off supertax on bankers’ bonuses over Christmas. The hue and cry from the Tory benches was almost deafening - alas for the poor bankers, when it comes to cynically touting a tiny concession to reactionary ideology, no U-turn is too whiplash-inducing for Osborne and Cameron.

Labour figures, including Darling, additionally claim that the only way the Tories can pay for these tax cuts (apart, of course, from ‘imprudent’ borrowing) is by imposing a hike in VAT. This is depressingly typical of the back-and-forth between the two parties, however - Labour also refuses to rule out a VAT rise, although, in an interesting twist on the usual laws of logic, no Labour figure will even be pinned down to saying in as many words ‘We refuse to rule it out’; is New Labour the most evasive political movement in history?

From this unedifying spectacle, there is only one conclusion to draw: as far as the economy goes, the two parties are presently engaged in shuffling small portions of the same money around in slightly different configurations. Want your tax money to be poured into that leakiest of vessels, the bureaucratised public services? Take the 1% rise on NI, and mark your cross for Labour on May 6. Want the same pittance to be marshalled in defence of family values? Cameron’s your man. A year or two years from now, both parties plan to gouge the public sector departmental budgets for all they are worth. At that point, all the toing and froing over a few billion quid will look like just the apolitical farce it really is. After all, how much use for a tax cut does a married couple thrown out of work have?

Not that we should blame the politicians, funnily enough; state power in bourgeois society constricts your movements like nothing else. There are, you would think, a thousand ways for a capitalist politician to cut a budget deficit without hammering the masses - an old-fashioned increase in top-rate income or capital gains tax; taking real control of the nationalised banks; even (say) legalising cannabis for a guaranteed spike in VAT takings. Once all these ‘options’ are filtered through the needs of the finance system, media-centred ideological hysteria and the vicissitudes of international politics, however, they turn out to be impossible.

The solution is in the hands of the workers’ movement - when we are strong, they can no more ignore us than the banks. Time is running out, however, for us to get our movement in shape - the strongest possible unity in defence of our conditions, ultimately on an international scale. That means industrial resistance, of course, but also doing politics properly - for a start, we should not be cajoled into ‘choosing our butcher’ out of these two sorry specimens on May 6. Vote for Labour candidates only if they oppose all cuts in public services and call for an immediate withdrawal of British troops from Afghanistan.

james.turley(at)weeklyworker.org.uk