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Home Publications There is no magic money tree: Parties should stop the pretence that ‘someone else’ can always pay

There is no magic money tree: Parties should stop the pretence that ‘someone else’ can always pay

Newspaper article

This article was first printed by the Times newspaper and has been reproduced here in full with permission.

Look through the manifestos of the main parties and a remarkable thing strikes you. They are all promising to raise a lot of additional money in tax, whilst apparently making hardly anyone worse off. The parties are even promising not to raise the main rates of any of the three taxes — income tax, VAT and national insurance — that account for two thirds of all revenue.

They are all sure they can get billions from reducing tax avoidance: £5 billion, £7 billion or £7.5 billion, according to which made-up number you choose to believe. Labour will hit “the rich” (not you or me) with a mansion tax, a big increase in pension tax, a top rate of income tax of 50 per cent. Then there are the non-doms. The Tories are not averse to hitting the rich either, with a swingeing increase in tax on pension contributions.

Companies and banks can pay too. The recent budget increased the “bank levy” for the ninth time in five years. It introduced the diverted profits tax — the “Google tax” — to widespread agreement that this is one of the most rushed and worst drafted pieces of tax legislation in years. Banks and tobacco companies remain in the parties’ sights.

This sense that there is free money out there just waiting to flow into the Treasury’s coffers without anyone noticing reached new levels in the Green party manifesto, which claims to have identified a truly staggering £200 billion worth of tax revenue from tax avoidance, financial transactions, the rich and the wealthy.

That would be laughable if it weren’t playing into a wider narrative that there is a magic money tree that we can pluck at will. There isn’t. All these taxes, if collectable at all, are paid in the end by individuals. Many of them, especially when layered one upon the other, will have damaging economic effects. They have something in common, too, with proposals to cut “welfare” spending. They are hidden from the mainstream voter. They take money from other (but as yet largely unspecified) people. 

Tax and welfare changes since the recession have left “middle Britain” largely unscathed, whilst hitting the richest hard and taking benefits from the poorest. This can’t go on. If we want to reduce the deficit, or maintain public services, we will have to pay. Not someone else. Or we’ll pay in the end by both chasing away wealth creation and increasing poverty.

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