Progress | Centre-left Labour politics

Hug a tax accountant

Labour needs to get technical on tax

You are the finance director of a large enterprise. Revenues are in the tens of billions, so obviously you pay attention to your costs. But you are also keenly interested in maximising your revenues. Right? I ask because we in Labour are not – hardly at all – interested in our revenues. As a party we debate endlessly how to spend, understandably, because spending is the end, tax the mere means. But you would still expect us to have some interest in maximising the means the better to achieve our ends.

Where we do talk about tax, the discussion concerns matters of ideological interest only. Should we raise the top rate of income tax? Your finance director cares not. She knows it will not make any material difference to her bottom line. Do it or don’t do it. It makes no difference to her. On the mechanics of how to tax, and on the detail of how to improve collection, we are almost completely silent.

The other parties talk about tax; they are interested in their revenues, the Tories especially. Ideologically, of course, they levy less, but they are skilled at maximising the rake from what they do levy. The general anti-avoidance rule, accelerated payment notices, strict criminal liability for undisclosed monies held offshore, recovery of unpaid taxes direct from bank accounts – all of these are genuinely radical measures introduced by the government and ones that Labour could have introduced, but did not.

There are a number of competing accounts of why this is so. The Tories are elected to government in times of austerity. And it is in times of austerity – when the state needs money most – that the political focus is on tax. In times of boom all anyone is interested in is how to spend the money. Another explanation – ‘stealth taxes’ being the latest of many examples – is that Labour focuses on increasing the tax base rather than reducing avoidance. Because, ideologically, we are the party that believes in levying tax we can let the collection take care of itself.

Although there is, no doubt, truth in these accounts, we cannot ignore a third. Culturally, we are not the party of money. We did not grow up with family wealth to shepherd. Outwitting the taxman is not conversation at our breakfast tables. Moreover, our parliamentarians, by and large, did not work as tax advisers before becoming members of parliament. A talented party member recently said to me that it is difficult to think of an occupation less suited than his to seeking nomination as an MP. He is a partner in the tax department of a City law firm.

The Tory selectorate is less squeamish. Tax advisers and accountants routinely become Treasury ministers. They bring with them a detailed knowledge of the craft of taxation, and Conservative tax policy is immeasurably the stronger for it.

We, on the other hand, make play with moral outrage. We give ourselves over to the cheerleaders at the public accounts committee – full of sound and fury but signifying nothing – without actually getting anything done. Our policy teams are overly reliant on briefings from the trade unions who, like everyone else, have axes to grind. But, more importantly, they do not have access to the right minds, to the leading technicians. It is Cary Grant they asked to catch a thief, not the constabulary.

To improve our effectiveness in government we must focus on tax as a means to an end rather than an end unto itself: quantifying the yield from raising the top rate of income tax should be the question on everyone’s lips, not the rhetorical flourish of whether the rich should pay their share. The fiscal carpet-bombing of increasing the base must be jettisoned for the economically efficient precision strikes of taxes which are closely drawn and effectively policed. We need unembarrassedly to welcome tax technocrats into our midst. With moral fury alone we cannot get the job done.

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Jolyon Maugham is a tax barrister

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Photo: Images Money

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Jolyon Maugham

4 comments

  • This article is very well said. Sadly, also, it seems Labour people are not particularly knowledgeable about the nuts and bolts of how a business operates. Has anybody had to find the wages on a Friday when a big customer is late with a payment? I have found the ignorance of this sort of thing sad, as, of course, I have found the obeisance to big finance built into the system..

  • Blair and Brown tried to be nice to Big Business so that they could get some contributions from them. Big mistake. Let us hope Ed Balls does not repeat this error if he gets the chance to do anything. We also need a more simple form of tax, based on average income. The current system is taxing the lower middle income earners (twice average income) far too highly and not taxing the rich (four to six times average income) nearly enough. The rich should be paying 50% on all income above £150,000 p.a. with no allowances under any circumstances.

  • I agree with you. Even if I had any appetite I cannot envisage a situation where I would pass selection as a Labour PPC or even councillor in the current environment.

    Speaking as a CA and an in-house tax advisor to a FTSE 100 multinational.

  • I’ve spent my career as a tax adviser advising against tax schemes . I now advise party blogging companies and co ops and I am saddened by the general level of tax awareness amongst clients.
    But I am trying to educate where I can!

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