Let's finally talk about tax

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Let's finally talk about tax
Mark Gill
Publication date: 12/04/2005
According to conventional wisdom, New Labour got into power by promising not to raise taxes. But in this essay from the Winter 2004 issue of the Fabian Review Mark Gill of Mori shows that voters are ever more ready to pay higher taxes, providing they see results for their money

For 20 years, the Labour Party has been growing ever quieter about tax. Tony Blair was convinced by Labour’s 1992 defeat that he should promise to make no tax rises in 1997, and his landslide victory that year convinced the party that this was the secret of electoral success, the key that would unlock the door to the Tory heartlands in the south east. This analysis is now taken for granted, but it is seriously flawed. While those on the left argue that Labour can, and must, still win the moral argument over taxation, no-one has realised that there is no argument, that the public is far less fearful of taxation than the Government seems to believe.

For whilst Labour was learning not to talk about tax, the population at large was growing ever more relaxed about it. Surveys consistently show that the public is far less concerned about taxation than about how the money is used.

Over the past 20 years or so there has been a definite shift in the public’s mind about the need for extra taxation. According to regular British Social Attitudes Surveys, a clear majority of Britain in the early Thatcher years agreed on not increasing taxes in order to spend more on health, education and social benefits. In 1983 for example, only 32 per cent of the public believed that taxes should rise for this purpose, whilst 54 per cent said they should stay the same. By 1990, attitudes had almost reversed, with 37 per cent saying they should stay the same, and 54 per cent saying they should be increased. Further, many opinion polls over recent years have shown broad public support for increased taxation for investment in public services.

The notion that tax-rising parties cannot win power seems to be a hangover from the 1980s, when Conservative governments were elected on tax-cutting manifestos, and from Neil Kinnock’s defeat in the 1992 election. It draws strength from the myth that Neil Kinnock lost the 1992 election because he promised to raise taxes, and that Tony Blair won the 1997 one because he promised not to. The flaw in this argument is that although Tony Blair pledged not to increase income tax rates in 1997, the key voters didn’t believe him anyway: in MORI’s 1997 final pre-election poll for The Times, 63 per cent said they expected that a Labour Government, if elected, would increase income tax, only 3 per cent lower than the 66 per cent who expected a Kinnock Government to do so in 1992.

This point was reinforced at the 2001 election. As early as December 1999, the public was convinced that taxes had risen under Labour: 28 per cent thought that the Government had kept taxes down since it had been elected, while 57 per cent thought it had not. By January 2001, when asked for their ‘thinking about all forms of taxes’, 48 per cent thought taxes had gone up since 1997 ‘for most people’ and 41 per cent that their own personal taxes had risen. Furthermore, few expected a re-elected Labour Government to have a better record of keeping its tax promises: at the end of May, 74 per cent thought that Labour would increase taxes if re-elected, and only 16 per cent thought it would not.

All told, the voters elected Tony Blair with a landslide in 1997, expecting him to increase taxes, and re-elected him in 2001 believing that his Government had done so, and would do so again.
Another clear example of public tolerance, indeed welcome of tax increase, was Gordon Brown’s 2002 Budget. Despite involving a substantial rise in taxation, MORI’s post-budget research for the Financial Times found 65 per cent of the public saying the proposals were good for the country as a whole, while only 20 per cent thought they were bad for the country. These are the best post-budget figures MORI has recorded since Denis Healey was at No 11. Indeed, 45 per cent of the country felt that the proposals were good for them personally, and 33 per cent said that they were bad. Again, this represents the most positive post-budget reactions measured by MORI since the late 1970s. In fact, according to MORI’s regular Delivery Index survey, in May 2002, following this budget, optimism about the future of the NHS reached a high point of +14 points. It is clear that people connected higher taxes from a specific source (in this case national insurance contributions) with promised improvements to a specific public service.

There are of course exceptions, where the public expressly opposes higher taxes—the petrol crisis of 2000 is perhaps one of the most striking examples. Yet one of the clearest messages from these examples is that there seems to be a hypothecation in the public’s mind on where the tax arises from and where it should be spent. The public may simultaneously support a rise in income tax, or national insurance contributions, to fund the NHS yet oppose an increase in petrol duties to raise the same sum for the same purpose.

Perhaps most importantly though, the public’s tolerance of taxation is strictly dependent upon recognising the necessity for it, and believing that the money raised will be properly and efficiently used. Looking back at 1992, evidence from the British Election Survey suggests that Labour’s election defeat resulted not from opposition to the idea of tax rises but from distrust of a Kinnock Government’s ability to spend the money raised wisely and efficiently.

So how are views about taxation likely to impact on the next election? In a survey in September this year, when asked to select from a list the issues which were very important in helping them decide which party to vote for in a General Election, taxation was placed sixth out of 16—behind health care, education, law and order, pensions and asylum. While taxation seems to be less salient than public service reform, there are nonetheless some dangers for Labour here. Among those who say that taxation is very important, more believe that the Conservatives have the best policies on taxation by a margin of 13 points. Although this is wider than the two point gap prior to the 2001 General Election, it is similar to the 14 point gap during the 1997 election.

However, for an issue to swing a voter from one party to another, they need to be confident that the other party can and will be able to deliver on their promises. Neither Labour nor Conservatives come out well on this level. MORI’s September poll for The Observer showed that the single image attribute most identified with both Labour and the Conservatives is that they will promise anything to win votes (41 per cent and 43 per cent, respectively). And the deeper problem for the Conservatives, if they intend to make tax cuts an issue at this election, as they did in the last, is that the public continue to say they want better public services and they don’t believe the Tories would cut taxes. In a MORI poll for the Financial Times in August, twice as many people (33 to 15 per cent) believed that a Conservative Government would increase the overall level of taxation rather than lower it.

The public is prepared to tolerate tax rises, and to some extent welcomes them. But in return, they demand visible improvements to the public services. The problem for Labour now it seems, is less that they are seen as a high tax party, but that after more than seven years in power the public optimism on improvements to public services is at best mixed. And it is failure to deliver visible improvements to public services that is likely to damage public attitudes to Labour on tax more than any other event.