Liam Booth-Smith is the chief executive of Localis.
At what point does a desire to tax stuff mean you’re no longer a Conservative? Is it a question of percentage or issue? This rate OK, that one not. Services for old people, tick, rehabilitation of sex offenders, cross. Or maybe wealth and labour? Tax my unearned income but leave my salary alone.
Traditionally the relationship between Conservatism and tax has been simple, perhaps best described by David Cameron in 2015 when he called high taxation “morally wrong”. Tories believe in keeping tax as low as possible – and this is a good thing. However, there are times when raising more revenue is necessary; when there is not enough money for the state to meet its obligations, or when society demands something only the state can reasonably provide. In such circumstances Conservatives can accept taxation because, to paraphrase Roger Scruton, the state is not an end but a means. The end is civil society and the state exists to protect it – and to fulfil that function it needs to be properly resourced. For Conservatives the question shouldn’t be whether tax is too high or low but whether the state has the appropriate resource to protect civil society to a standard we deem morally acceptable.
According to the Institute for Fiscal Studies, after the 2008 financial crash tax receipts fell by 4.4 per cent (2008-09) and 5.5 per cent (2009-10) respectively. We’re not predicted to regain pre-crash levels of receipts (37.2 per cent of national income) until 2020. Combine this with increasing demand for public services as both the population ages and expectations rise and you reach the point we’re at now. Simply put, for the services the state is obligated to provide, and in this case I’m referring to those at the local level, it doesn’t have the necessary resources.
One Tory leader told me they “got into politics for precisely the opposite purpose” to rationing care services for the elderly – but that is what they have to do. A quick scan at the health and social care system more generally, and you’ll understand this isn’t an isolated sentiment. We’ve not yet felt the crisis in children’s social care, but on current trends it won’t be far off.
If, like me, you consider all this a threat to civil society you need a solution.
In this spirit Westminster City Council took the bold step of suggesting its wealthiest residents pay more in council tax in order to fund a range of services for the homeless and young people. I applaud the bravery in asking the question. They are not mandating anyone pay, it is not a tax rise, the levy is voluntary. To my mind this is a distinctly Conservative approach to new revenue raising.
Tapping into goodwill, establishing the connection between tax and the responsibilities and association we have toward one another. This is why Localis has recently undertaken a new project exploring the idea of how goodwill can be monetised.
Similarly Nick Boles and Michael Gove have both intervened in recent months to make the Conservative argument around taxation more nuanced. Essentially positing the deceptively simple notion that people mind less when they know where it’s going and how it’s spent.
On the environment, Michael Gove argued “people are already prepared to pay more in order to help the environment” and the five pence plastic bag charge has proven the case. Nick Boles has taken the idea of a hypothecated NHS tax and wrapped it in a neat political package, arguing for National Insurance to be renamed National Health Insurance and become a singular health fund stream. This would remove it from the general tax and spend discussions of government and force political parties to engage honestly about their plans for the NHS and how much money is needed. “Taxpayers ought to know how much it costs to enjoy the right to free healthcare.” Quite.
I don’t think the fundamental relationship between Conservatism and tax is changing, rather it needs to be restated. In short, we tax to protect civil society. Conservatives, particularly against an opposition that doesn’t follow the normal rules of economic hygiene, lose the debate on taxation when they don’t win the moral argument behind it.
The recent interventions of Michael Gove and Nick Boles suggest this might be changing. In the case of the Westminster City Council voluntary levy, Conservatives should rally round and test this idea more widely. Making the connection clearer between the money we contribute and the value it creates isn’t an argument for taxation but for a stronger civil society.