The Economist - USA (2019-11-30)

52 Britain The EconomistNovember 30th 2019

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big rise in the corporate-tax burden (to the

highest level in the g7), heavier taxes on

capital gains, dividends and inheritance,

plus a financial-transactions tax.

As for the tax-cutting Tories, they want

to raise the threshold for national-insur-

ance contributions (nics), but only in

stages, and they too would reverse some

planned corporation-tax cuts. They also re-

new their promise of no increases in in-

come tax, value-added tax or nics. Paul

Johnson of the Institute for Fiscal Studies,

another think-tank, calls this irresponsible

given the prospective rising tax burden to

cope with demographic change. No party

has a sensible plan for tackling the mess of

property taxes and stamp duties that help

to gum up the housing market.

All three manifestos nod to the environ-

ment, with talk of a green industrial revo-

lution and uncosted promises to advance

targets for net-zero carbon emissions. But

most striking of all is Labour’s economic

programme. The party not only promises

to nationalise water, rail, mail and part of

bt(at prices set by Parliament, not the mar-

ket), but also to set up a national invest-

ment bank and even a state drugmaker. It

promises to transfer 10% of big firms’

shares to a fund managed by employees, as

well as giving workers a third of seats on

company boards. This, the most left-wing

challenge to a capitalist, mixed-economy

system since François Mitterrand’s in

France in 1981, fully justifies the manifesto

title of “real change”.

And then there is Brexit, which is little

discussed beyond the slogans of “Stop

Brexit” (as urged by Lib Dems and Scottish

Nationalists) and “Get Brexit done” (the To-

ries’ mantra). Labour promises another ref-

erendum, in which Mr Corbyn would be

neutral. But the riskiest promise is the Tory

one not to extend the transition period be-

yond December 2020. No expert believes a

trade deal with the eucan be done by then,

raising once again the prospect of a no-deal

exit at the end of next year. And what hap-

pens on Brexit may be more consequential

than any number of manifesto pledges. 7

Chequeswithoutbalances

Britain,governmentspending ,%ofGDP

Sources:OBR;partymanifestos

2000 2320151005

50

45

40

35

30

Actual

Forecast

LibDem

Conservative Labour

OBR (Mar 2019)

Forecasts

E

ven asbothmainpartiespromise

more spending, they insist that most

voters will not pay a penny for it. Labour

says those earning under £80,000

($103,000) will see no rise in income tax,

despite its promise of more than £80bn a

year of extra day-to-day spending (equiv-

alent to 4% of gdp). The Conservatives,

who plan a more modest spending rise of

£3bn, say they can afford to do this while

reducing the number of workers who

have to pay national-insurance contribu-

tions, a payroll tax. Can taxpayers really

get something for nothing?

For most of the past century, Britain’s

tax burden has become more evenly

spread. Between 1920 and 1970, as de-

mand for public services grew, the share

of citizens liable for income tax more

than tripled. But recently the tax base has

been shrinking. A decade ago 95% of

workers paid at least the basic rate of

income tax. Now only 80% do. That is a

result of reforms by the Conservative-

Liberal Democrat coalition of 2010-15,

which decided the best way to help the

poor was not to increase welfare, as

Labour had, but to raise the threshold

above which workers paid income tax.

Since 2010 the tax-free allowance has

increased from £6,475 to £12,500. Boasts

of“takingpeopleoutoftax”have become

a staple of Tory budgets.

Meanwhile, the burden on the richest

has grown. The top 1% of income-tax

payers contribute 30% of the total take,

up from 22% in the mid-2000s. Labour

would rely on them still more heavily.

The party claims (dubiously) 95% of

people would pay no more in tax for the

free broadband, better health care, free

university and other goodies it promises.

Both parties’ plans are flawed. Taking

the poor out of tax, as the Tories promise,

is an expensive way to help them, since

higher earners also benefit from in-

creases in the allowance. And Labour’s

dependence on the rich is risky. High

earners are the most responsive to tax,

and their incomes are among the most

volatile—as Britain discovered in the

financial crisis, which whacked bankers’

bonuses and with them tax receipts.

Only the Lib Dems admit that their

spending plans would require most

people to chip in. They propose an extra

1% on all income-tax bands. Other par-

ties will surely need to drop the some-

thing-for-nothing approach soon. An

ageing population and the need to decar-

bonise are heavy responsibilities that

cannot be borne by ever fewer people.

The curious case of the missing taxpayer

Fiscal policy

As spending rises, fewer people are paying into the system

A

t a rabbi’shome in London, a dozen or

so guests take their seats for Shabbat

dinner, a Friday staple of Jewish house-

holds. Before digging in to hunks of challah

bread and home-made hummus, each an-

swers a question from their host: “Which

non-politician should be prime minister?”

One guest nominates Greta Thunberg, a cli-

mate-change activist. Another plumps for

Prince Andrew on the grounds that he has

time on his hands and has already man-

aged to unite the country. The oldies are

baffled by a teenager’s choice of Lizzo. “A

pop star,” she explains.

This jolly ice-breaker is also a calculated

dose of escapism. Like many other Britons,

the guests are not thrilled that the next

prime minister will be Boris Johnson or Je-

remy Corbyn. Jews have particular reason

to take against Mr Corbyn, who has been

accused of turning a blind eye to anti-Sem-

itism in Labour ranks. On November 25th

Ephraim Mirvis, the chief rabbi, wrote in

the Timesthat a “poison—sanctioned from

the top” had spread. The next day Mr Cor-

byn declined four times in a bbcinterview

to apologise for the long-running sore.

Mr Johnson faces his own charges of

failing to confront prejudice, in the form of

Both potential prime ministers face

accusations of prejudice

Politics and religion

Pick your poison

Different hymn sheets

Source:BenClements, Leicester University using BES data

Britain, party of choice, by religion

2017 generalelection,%

0 20406080100

Anglican

Catholic

Judaism

Islam

Conservative Labour Other