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Friday, 4 March 2011

Mr Miliband's Inheritance

As I see it, the legacy of New Labour is a bit like this:

On the one hand, New Labour encouraged the idea that governments are things which hand out benefits, to everyone and pretty much regardless - so-called Universal Benefits like the "Winter Fuel Payment" which you can collect while living on the Costa del Sol provided you are over 60. (Give them your details and it's paid directly into your bank account, for life). Gordon Brown regards such universal benefits as his greatest achievement. The State taketh and the State giveth back, minus overhead costs.

On the other hand, New Labour eroded the tax base by making it entirely possible for non-doms, rich doms and corporations to live and operate in the UK while paying less tax than ever before - maybe as little as one per cent, but what's one percent between friends? Her Majesty's Revenue and Customs added its own gloss to New Labour policy, taking the view that for rich people and corporations, paying tax is essentially like charitable giving. It's voluntary.

As a result, the only people in line to pay for Universal Benefits are the Squeezed Middle and the Sat-On Bottom who receive them. Since the overhead costs of administering these schemes of Take-and-Give are not inconsiderable, the Middle and the Bottom both end up feeling that they are not getting a particularly good deal, especially when the Take increases and the Give diminishes.

A break with New Labour's past would involve asserting that the State is not really there to hand out benefits, let alone sweets to spoilt children. It has more important tasks such as defending its citizens from criminals and tyrants, building infrastructure, and providing a limited range of services of which education and health might be the two most important.

Benefits are things which you get back when you pay into insurance or pension schemes. The State may establish these and regulate their running, but they are a distinctly different line of business which should be kept apart from general taxation.

A break with the past would also involve saying that you can't live here, work here or run corporations here without paying your fair share of taxes here - and not just saying it, but organising legislation so that the obligation to pay taxes can't be wriggled out of.

This second break is long overdue. As far back as the First World War (and again the Second), Parliamentary Committees and the Inland Revenue plagued the Vestey family ( ranches, meat packing, butchers' shops) trying to shame them into paying some UK taxes. Without success. And the latest Lord Vestey is still among us. (For details of this extraordinary saga, see Nicholas Shaxson, Treasure Islands: Tax Havens and the Men who Stole the World).

But the first break is probably impossible for Mr Miliband to make. In the UK, elections are won by electoral bribery and Mr Miliband would not be a bog-standard politician if he did not present himself as The Man Who Will Give You Your Benefits Back.

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