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Vital Tax Debate Has Barely Begun

(Featured image credit: Justin Tallis/Getty)

So, the latest cat is out of the latest bag – in this case huge funding cuts to 10 large London resulting, according to the leaked memo, in longer waiting times, a reduced range of treatments, closure of some A&E and Maternity units and “poorer health care”.

The financial gap is around £180m.  A large sum in some respects, but actually small beer compared to the total heath budget (for 2018) of £147 bn. So much more misery caused by around one-tenth of one percent of the larger figure.

It just doesn’t make financial sense.  Think about the lost productivity resulting from “poorer health care”. Think too about the costs added to social care, emergency services.

There is a strong argument for saying the restrictions on funding are a false economy.  It is more sensible to invest than cut.

And it seems that is a message that is gaining ground. Labour’s relative success in the General Election was borne out of an anti-austerity message. That in turn tapped into a growing acceptance of targeted tax increases to provide the necessary cash.

You Gov found that not only would people support an increase in National Insurance to support health care (as has been done before, don’t forget), but that  increasingly there was  recognition that  the current tax regime was unsustainable.

Perhaps this in part explains why Labour was able to run a campaign that explicitly included tax increases with such success. There would seem to have been little detriment to a policy that was presented as no tax increases for 95% of the population – and tied the higher rates for the better off to a credible thresh-hold (£80 k income per annum) and rates that had been controversially withdrawn and reduced by a previous Conservative-led administration.

Conservative  attempts to undermine Labour on this  floundered, but the usually reliable  Institute for Fiscal Studies questioned whether  Labour’s plans had indeed been fully costed (whilst always remembering that   the Conservative alternative  was  not costed at all!)

So three things come out of all this.

First, as Bill Clinton so successfully demonstrated “It’s the economy, stupid” – the primacy of economic issues has been reinforced again today by shadow Chancellor John McDonnell prioritising austerity issues in Labour’s repose to the Queen’s Speech.

Second, the mood has changed. There is an appetite for and acceptance of targeted selective increases in tax, especially for healthcare, from those able to contribute.

But third, and most importantly for what happens next, the process of detoxifying the debate on tax is a long way from complete.   There still seems to be disconnect between the public services we believe we should have, and willingness, collectively, to pay for them.

The electorate has, in effect, said the current trajectory of government policy is unsustainable. The terrible attacks and tragedies in Manchester and London have further raised awareness of the value and cost of key public services. There is an opportunity to build a consensus and change the narrative on public services, social good and taxation.  Our politicians need to take it.

Whether they  will or not is another story.

A version of this post also appears in The Huffington Post

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