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Britain The Economist January 27th 2018 47
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48 Northern Ireland’s shutdown
49 Bagehot: The Midlands engine

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The politics of tax cal political culture and round-the-clock
Sacred cows no more media coverage makes it hard for chancel-
lors to take unpopular decisions, says Ken-
neth Clarke, who did the job in 1993-97. “A
few years ago [an increase in taxes] would
not have been regarded as sensational,” he
says. “People knew perfectly well that
sometimes taxes went up and down.” In
2002 Gordon Brown increased national-
Long-standing opposition to taxrises is slowlysoftening
insurance contributions (NICs), promising
ENIS HEALEY had a bittersweet mes- decades to come. Political minds on the the extra money for health care. But such
Dsage when he took to the stage at La- right and left are turning to the question of boldness is rare. These days, governments
bour’s annual conference in 1973 with a how to raise this kind ofmoney. preferto raise moneybystealth. In the Hea-
pledge to increase taxes. There would be Until recently, politicians could dodge ley budget of1975, there were eight big tax
“howls of anguish” from the rich, the then tough decisions on tax. From the 1950s to measures. In George Osborne’s budget in
shadow chancellor promised delegates in the late 2000s, the economyin general and 2016 there were 86 craftylittle ones, includ-
Blackpool. But he added: “Before you wages in particular grew much faster than inghighertaxes on landfills.
cheer too loudly, let me warn you that a lot they are growingtoday. That made it easier But the reality of Britain’s financial
of you will pay extra taxes, too.” Pay they to collect extra revenues. In the decade to straits is forcing a rethink. The best esti-
did. Two years later, Healey raised duties 2008, bankers’ juicysalariesand rising em- mates say that the NHS needs another
on alcohol and tobacco and increased the ployment meant that income-tax receipts £20bn ($28bn) peryearby2022, equivalent
basic rate of income tax from 33% to 35%. It rose by 60% in real terms, despite a soften- to 1% of GDP. Other departments are also
was the last time a British chancellor ingofthe income-taxregime. squealing. This week the head of the army
moved the basic rate upwards. As a result, the public is unused to the issued ominous warnings about the need
Today such rhetoric—and such a poli- idea of structurally higher taxes. A hysteri- formore cash. Voterswill have to pay more
cy—is alien. The tax burden as a share of or receive even less—and after eight years
GDPhasdropped some three pointsbelow ofcuts, they have no appetite forthe latter.
where it stood in Healey’s day. Income-tax They can’t take that away from me The two main parties are responding,
rates have fallen steadily, as tax-free allow- Britain, income tax, years ending March 31st albeit cautiously. Labour talks boldly
ances have risen (see chart). The bracing, Basic rate, % about raising revenues, including by re-
revenue-raising budgets of the past have 35 versing recent cuts to corporation tax. But
given way to ones that trumpet tax cuts 30 even its avowedly socialist leaders blanch
and do their best to disguise measures that 25 at increases to tax for anyone bar the rich.
might bringin more money. 20 They have ruled out increases to the basic
Yet the long-term tax-cutting trend may rate ofincome tax, VAT orNICs. Onlythose
be over. Ifthe qualityofpublicservices—in 1974 85 95 2005 18 earningover£80,000 a year—aboutthe top
particular, the National Health Service—is Personal allowance*, £’000, 2017 prices 4%—would face higher taxes (a policy
to be maintained, Britain faces the grim 12 which might not raise money at all, in part
prospect of across-the-board tax increases. 9 because high earners are adept at manag-
Healey’s budget, one ofthe harshest in the 6 ingtheirfinances). Recentlya shadowmin-
post-war period, raised tax equivalent to 3 ister raised the prospect of those in big
1% of GDP. According to official estimates, 0 houses paying more council tax. He was
putting the country’s finances on an even 1974 85 95 2005 18 promptly forced to resign.
keel requires permanent tax rises in the re- Sources: Tolley’s *People aged 65 years and under. Among the Tories, there is a growing
IncomeTax; IFS; BofE
1974-89, single people only
gion of 2% of GDP each decade, for many clamour for more spending, if not yet for 1