Sky Views: More spending means more tax - for all of us

Sky Views: More spending means more tax - for all of us

Ian King, Business Presenter

It was a report barely worth the paper on which it was printed.

The British Social Attitudes Survey revealed last week that "after seven years of government austerity, public opinion shows signs of moving back in favour of wanting more tax and spend".

It reported, for the first time since the financial crisis, more people (48%) want higher taxes to pay for increases in public spending than want tax and spending levels unchanged (44%).

So why was this report not worth the candle? Simple. NatCen Social Research, which published it, did not ask the more nuanced question of "Would YOU be prepared to pay more taxes in return for higher public spending?" If it had, it would have probably found fewer people demanding higher spending.


The chances are that what Britons really want is higher taxes for other people and more spending on themselves. Jeremy Corbyn's unexpectedly strong showing in the General Election proved that.

Unfortunately, this subtle difference went largely unreported, adding to a growing sense - along with calls for a relaxation in the cap on pay rises for public sector workers - that Britons want an end to so-called 'austerity'.

But do people genuinely want higher taxes and more public spending? The record proportion of people wanting such policies, as measured by the Social Attitudes Survey, is 65%. That was in 1991 - the year before John Major was elected with a record number of votes against a Labour Party specifically promising higher taxes and public spending.

The chances are that what Britons really want is higher taxes for other people and more spending on themselves. Jeremy Corbyn's unexpectedly strong showing in the General Election proved that.

The Conservatives have only themselves to blame for the popularity of such attitudes. George Osborne's continued increases to the personal allowance hollowed out the tax base. He lifted so many people out of income tax that 43% of the public no longer pay it. Such people, by definition, will be less interested in electing a government promising to hold down taxes by spending public money carefully.

Image: England's NHS hospital and ambulance trusts had a deficit of over £700m for the financial year to April

Labour succeeded by offering to shower money on all comers: students would enjoy free tuition, pensioners a continuation of the 'triple lock', public sector workers generous pay increases. All funded, supposedly, by higher corporate taxes and those earning more than £80,000 a year.

The flaw in the policy was nailed, with characteristic logic, by the Institute for Fiscal Studies. It noted the policy would not raise the sums Labour was seeking because corporate profits are not high enough and there are too few people earning more than £80,000 annually.

As Carl Emmerson, deputy director of the IFS, noted: "(Labour) have supposedly identified £49bn of tax increases. That is an overestimate.

"They certainly shouldn't plan on their stated tax increases raising more than £40bn in the short run and, more likely than not, they would raise less than that.

"They would certainly raise considerably less in the longer term."

He pointed out the proposed hikes in corporate taxes would "still make a broad group of people worse off just as surely as would increases in VAT or in the standard rates of income tax" because business taxes represent money that "would otherwise have ended up with people - and not only rich ones". The cost of those higher taxes would probably "be passed to workers through lower wages or consumers through higher prices".

Mr Emmerson added: "This isn't to say we shouldn't tax businesses. But we shouldn't pretend that it is somehow victimless and hence fundamentally different from personal taxation. The impacts on households are just less transparent."

Image: Thousands of people have been calling on the Government to save the NHS, one of Britain's largest public services

And there's the rub.

The national debt is now approaching 90% of GDP, making more borrowing unadvisable. The highest earning 1% of the population already pay 27% of all income taxes. Not much more can be squeezed from them. And, as we try to make Britain more attractive to investors after Brexit, raising company taxes probably isn't wise. So any meaningful hikes in public spending will mean tax increases for more than just companies and top earners.

Thanks to the ineptitude of Theresa May and her advisers, the economy barely figured in the election campaign, which was scandalous.

The public finances are not in quite as parlous a state as when Gordon Brown left 10 Downing Street. Back then, of every £100 spent by the government, £22 was borrowed. However, for every £100 spent this year, £8 will still be borrowed. Britain continues to live beyond its means and pile up debts for our children and grandchildren. Taxing, in some cases, the unborn. How can that possibly be fair?

The Irish people, after the financial crisis, were honest enough with themselves to admit they all enjoyed a party during the boom years and that they all had a part to play in the subsequent clean-up. They went through a period of genuine austerity and that is why Ireland's debt-to-GDP ratio is now lower than Britain's.

But too many people in Britain appear to be in denial. The only way public spending can rise significantly is if it is paid for by higher taxes for everyone. There is no alternative.

Sky Views is a series of comment pieces by Sky News editors and correspondents, published every weekday morning.

Previously on Sky Views: Adam Boulton - Why the humble tie still matters