The tax shift

Despite being the late entrant, Chris Huhne has already been more successful than any other candidate in this race in terms of shifting the debate onto both policy in general and his agenda in particular. As has been mentioned elsewhere, he was the only one on Saturday who made a point of talking about the need for the party to improve its Parliamentary Gender Balance; now they’re all talking about it.

He has also brought with him not just environmental rhetoric but environmental policies. Ming announced his top three priorities on Friday as being “the environment, the environment and the environment” yet thus far has been rather sketchy on details. Chris on the other hand has been quite clear: he wants to see a radical tax shift off income and onto resource taxation.

The party has been paying lip service to this idea since at least 1998 and Paddy Ashown’s post-97 policy review yet has always been forced into the background as the front bench has competed with itself in what clever income tax policies it can come up with next. So we had the penny-in-the-pound. So we have local income tax and the 50p rate. Over the past few years I have grown increasingly desperate over this, unable to see how it makes any economic sense whatsoever. Finally, someone is prepared to use his time in the media spotlight to put a contrary view and I am delighted.

Not so some of my fellow bloggers. Militant Ken feels that we shouldn’t be calling for a tax shift at all, but instead should plough the money we raise into environmental schemes. Missionary Iain on the other hand feels that Huhne is being, to use a Sir Humphreyism, “courageous”. I’m delighted we are finally having this debate, and respectfully disagree.

With regard to Ken’s argument I will simply say this: no-one is saying we shouldn’t invest in environmental schemes. But what we are saying is that the overall level of tax should not be raised. To go into the next election saying otherwise would truly be suicide, especially since we would be raising revenue through what are often caricatured as “stealth taxes”. But fundamentally, what this policy is saying is that individuals should be entitled to keep more of a proportion of their income. In return, when they use a service, they should have to pay more in terms of its environmental externalities.

In a lot of cases it isn’t a matter of taking the car or taking the bus; it is a case of using the car less. Reduction should be our priority, not encouraging greener alternatives to current levels of consumption.

There’s also only so much we can do with subsidies. The rail industry receives more state aid than it ever did before privatisation, yet every time that money is increased, costs simply go up and we are back where we started. That is the perversity of using public money to shore up unpopular services.

Surely, and I’m not suggesting there isn’t a balance to be struck, but it would be better for people to use their own money to choose whatever service suits them, even if it costs a bit more, than for the state to choose what service is best for them and then subsidise it (God I sound very Reform there – I should add that I’m talking about things like transport here not health!)?

Iain worries, if I may paraphrase, if this isn’t too much too fast. Where I would concur is that we would have to come up with some kind of safety net – some way of ensuring that the poorest in society can still adequately pay for heat and light. Beyond that though, I think it is a strong message. Raising personal allowance in the way Huhne suggests would lead to a big net increase for most wage-earners and I think they would respond well to the idea of being able to take more personal responsibility over both their own lives and their own environment.

The messages will be absolutely vital here, but I think we are helped by Cameron wanting to shift onto this ground. My suspicion is that Dave will want to essentially adopt the line being taken by Mark Oaten this evening – that rather than talking about the environment in terms of taking a bit of pain now in order to avoid bigger problems down the line, all we have to talk about is simple pain-free solutions such as money off council tax for recycling and pretending that bio-ethanol will allow us to carry on as before. It will certainly have its detractors and I don’t see the Truckers Lobby liking it very much, but it will look more credible and make us look like we are prepared to be more honest about what needs to be done. Lembit’s analysis on Meeting the Challenge that we should be more willing to take risks suggests to me that he is backing the wrong candidate here.

But we won’t get anywhere unless we are willing to champion it as one of our Big Ideas. That means doing everything we did a couple of years ago – and more – with local income tax. It won’t be an easy sell, but I really believe that if we sell it with conviction we can significantly shift the debate onto our ground over the next couple of years.

This is exactly the sort of thing I want this party of ours to be doing and I’m delighted to be supporting a candidate who wants to lead in this direction as well.