Saturday, July 19, 2008

The collapse of the "progressive consensus"

Do centre-left governments have any room for manoeuvre on tax anymore? Here's my column in today's Newcastle Journal.


Aneurin Bevan once famously described socialism as the language of priorities. It has been a fairly long time since the Labour Party talked about socialism, but at times like the present, it can't help but talk about priorities.

And few issues go more to the heart of what a centre-left government's priorities should be than the ongoing controversy over fuel taxes.

Is it the primary job of a Labour government, especially in times of economic hardship, to protect the living standards of the worst-off by trying to keep household bills as low as possible?

Or in this era of climate change, do governments of the left have a higher responsibility - to try to save the planet from the potentially deadly effects of the free market by curbing the use of fossil fuels?

The consensus of opinion within the wider public on this score has ebbed and flowed back and forth over the past decade.

Nearly eight years ago, in the autumn of 2000, New Labour's political hegemony was brielfy threatened by the eruption of the fuel protests, following the imposition of a "fuel price escalator" designed to curb greenhouse gas emissions.

Public sympathy at the time was initially with the protesters, though it evaporated pretty swiftly once they started blockading power stations and generally behaving like a bunch of 1970s flying pickets.

And over the ensuing years, opinion swung decisively back in the direction of the "green" lobby, to the point where any government which failed to do something to tackle car use risked being seen as irresponsible.

But that was before the credit crunch. The environment, which at one time was a big enough issue to persuade David Cameron to start cycling to work, has now slipped back down to its customarily more lowly place in the public consciousness.

Instead, we're back on the old, familiar ground of "the economy, stupid."

When the proposed fuel tax increase was first outlined in last year's Pre-Budget Report, inflation was still well under control and the effects of rising food and fuel costs had yet to be seen.

But nine months on, it seems, greenery has once again become a luxury that the nation cannot afford.

The pressure had been on Prime Minister Gordon Brown and Chancellor Alistair Darling over the fuel tax issue since the start of the year when the business and motoring lobbies first begun to hone in on it.

At one time, it might have been seen as a test of the government's resolve. I myself wrote in this column that the question of whether ministers were still prepared to make the case for the tax rise would show whether the Brown administration retained a shred of self-belief.

In the end, though, it was no great surprise when Mr Darling announced on Wednesday that the increase had been postponed once again. He probably had little option.

Indeed, with another crucial by-election for the government coming up in Glasgow East next Thursday, perhaps the only surprise was that he didn't do it sooner.

It won't stop there, either. Now that the government has u-turned on the fuel tax rise, expect it to come under sustained pressure to scrap the planned changes in vehicle excise duty to discourage "gas guzzling" cars.

When this idea was first dreamed up, the government probably had the so-called "Chelsea Tractor Set" in mind - a fairly convenient political target.

But in yet another example of the law of unintended political consequences, it turns out that the cars most likely to be hit by the proposed changes are overwhelmingly owned by the worst-off.

In the end, backbench Labour MPs are no more likely to let this happen than they were likely to allow the government to scrap the 10p tax rate.

I recently saw the planned changes to vehicle excise duty rather unfairly but amusingly caricatured on a satirical website as a spoof news item about Labour's "master plan" to restore its political fortunes.

"Labour will today unveil a detailed plan to alienate its last remaining pockets of support. The central plank of the party's strategy involves identifying the ten most popular family cars in Britain and then making them a nightmare to own," it read.

A “Labour spokesman” was quoted as saying: "We're going for the double whammy of making them too expensive to drive, but also impossible to sell."

Silly? Maybe, but it was a light-hearted way of making the serious political point that Labour simply cannot afford to antagonise its natural supporters any more than it already has done.

But the vehicle taxation issues are an illustration of a much wider political truth, that the government now finds itself in a position on tax where it has virtually no more room for manoeuvre.

Both Tony Blair and Gordon Brown have talked at length over the past decade about the need to build a “progressive consensus” in which people accepted that decent public services required taxes to be maintained at a certain level.

In fact the opposite has happened. People seem increasingly less and less happy to pay their taxes, with the result that the existing tax-take as a proportion of GDP is likely to come more and more into question.

It is this that has essentially brought about the Liberal Democrats’ near-total volte-face under new leader Nick Clegg from being a party of 50p tax rates to a party of tax-cutters.

Back in the early days of New Labour, John Prescott and others dreamed of using the tax system to bring about a major shift in public behaviour, making private transport progressively more expensive and using the proceeds to fund better and more accessible public transport.

However desirable this might once have seemed, the government’s inability to impose even small increases in fuel tax show that it has now become a political impossibility.

When Bevan talked about the “language of priorities,” there was a basic assumption that governments had the ability to choose between competing interests and concerns.

Increasingly, for this government at least, those choices no longer exist.

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neil craig said...

I don't think public opinion has ever swung solidly for what the "envirnmental" movementb want. For years the media has been wholheartedly pushing the warming scam with no counter arguments being allowed. As a consequence polls showed most people saying they were opposed to global warming in pretty much the same way a poll taken of people leaving church would show they were aganiost sin. On the other hand doing anything about it was always at the bottom of any listing of the most important "issues" which shows it is a pro-forma position.

Now, of course, we know not only that temperatures have been stable for a decade but that cooling is now taking place. People, correctly, think not only the Greens but the entire political class & media have been lying to them.

James Valentine said...

Hi there Paul Linford

Your pieces are usually very good but you seem to have slipped up on this one, you appear uncritically to swallow every Tory myth going!

1. You miss the point about VED by focussing on its retrospective element. The duty change from 2009 onwards means that on small new cars you will pay **less** excise duty than at the moment – on certain vehicles you will pay nothing at all.
Whereas if you buy a Chelsea tractor then you will be clobbered by with higher VED and a new "showroom tax".
So this measure is a) environmental, because high emission cars will pay more and b) progressive because rich motorists will pay a lot, poor motorists will pay nothing.

2. Would the Tories have introduced this tax? I doubt it. Boris Johnson has now scrapped plans to make owners of gas guzzling cars pay a £25 congestion charge – costing the London taxpayer an estimated £400,000. Boris’ actions as the Porsche-owner’s friend are a good indication of where the Tories are coming from.

3. You are apparently confused about the politics of environment generally in that you assume that it is all about tax, which is isn’t, and that being environmental necessarily costs you money, which is doesn't. For example, home insulation grants help to save the environment and save you money, and the best deals are for those over 70 or receiving benefits.

4. I think you miss the more general point about tax and Labour in that, broadly speaking, the Tories have been forced onto Labour’s territory of keeping taxes at approximately the same level in order to maintain more or less the same services in key areas like health and education. The Tories now accept the NHS. Or at least that’s Cameron and the front bench’s line, for now. (In power, I think they will go back to cutting taxes and services).

5. The one area where there is possibly scope for public expenditure cuts (and, eventually, corresponding tax cuts) is on social security and especially invalidity benefit. That’s why this week’s announcements are interesting. The proposals to reform social security are linked with the idea of further growing the productive proportion of the population. Although the Tories blather on about how they would have carried out these reforms anyway, I am not sure. Getting more people working includes getting more women working. Cameron and the front bench may support this but there is another very strong element of the conservative party that wants to see the opposite – more women at home, baking cakes.

So choices on tax and the environment do exist, and they are being exerted. Whose side are you on?!!

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