Tackling tax evasion is not enough

Labour must show it understands that clamping down on tax evasion alone will not create the prosperity we need to fund our public services, argues Mike Katz

Much of John McDonnell’s analysis of the government’s economic failure – and the risk to our prosperity and public services that has resulted – was spot on. But how attractive was the alternative he set out in his pre-budget speech yesterday?

We went into the last election trailing the Tories on economic credibility despite George Osborne failing his own exam. Yet now we are currently nearly 30 points behind on this measure.

The Institute for Fiscal Studies have said that fiscal policy ‘is not currently subject to any fiscal targets that can be met or missed in the remainder of this parliament.’ It is as if the coalition government’s fiscal policy had never happened. Yet it is not enough to point out this cocktail of hubris, hypocrisy and confusion that has informed Philip Hammond’s tenure at the Treasury.

Diagnosing the government’s failure, actually its triple failure – in that is has failed to grow the economy, failed to meet its austerity targets and failed to develop an alternative – is certainly an essential first step to closing this gap. But it is not sufficient.

Low pay, sluggish growth, poor productivity, short termism – all these symptoms of our economic malaise were well-diagnosed by the shadow chancellor. But what of Labour’s proposed cure?

We need to demonstrate a clear vision, backed up by workable, costed policies to win back voter’s trust on the economy. And we need to explain how we do this whilst surviving the process of Brexit. Not an easy or enviable task – but one we cannot avoid.

Given the blanket coverage of the unfair and ruinous hike to business rates, there was a missed opportunity to signal sympathy for firms facing rising bills and set some real challenges for the chancellor next week.

And more could have been done to underline the impact of immigration post-Brexit on our economy.  After all, businesses have been fretting over the past few years about the tightening of the visa regime and they now are fearful of the impact of proposals to curtail freedom of movement. They are sympathetic to Labour’s values and rhetoric here.

There was plenty in the speech about protecting our public services, particularly the National Health Service. While we must jealously guard our standing as the party of the health service, surely last week’s byelection result in Copeland shows we cannot rely on it as our get-out-of-jail card.

Rebalancing the economy, creating a new national investment bank and delivering a proper house building programme are all to be applauded. Sadly, there was less about how Labour can support businesses, especially small businesses and the growing number of self-employed people.

This growth, together with our aging population has a serious impact on our tax base. Of course, McDonnell was right to stress the importance of taking serious action on tax evasion and avoidance if we are to properly fund public services. Whether this is best achieved by forcing all those on salaries of £1 million or more to publish their tax returns is more of a moot point.

This policy has a populist tone to it, for sure, but, concerns about privacy aside, will it keep rich people honest? Tax returns tell you what people declare as their income; not what they are keeping from the taxman. More work is needed here.

If we want to restore our economic credibility as a party, this does not mean eschewing radical ideas or regurgitating past manifestos, but it does mean engaging with the realities of the economy; where millions of working people rely on strong, fairly-run businesses for employment and prosperity in their community.

The majority of people in this country work in the private sector; we do not betray our progressive values by engaging with that majority’s concerns at work unless we show are comfortable talking to, with and about businesses.

McDonnell was right to say that ‘we can’t run first rate public services on a second or third rate economy’. Labour must show it understands that tackling tax evasion is essential, but insufficient, to achieving the prosperity we need to have the services we deserve.

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Mike Katz is a former list candidate for the London assembly and national vice-chair of the Jewish Labour movement. He tweets at @mikekatz

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