UK taxes are far too low and should be much higher
Here’s something the main parties don’t want you to know: UK taxes are far too low and should be much higher.
Simon Wren-Lewis explains the reasons – with graphs and everything! – here: mainly macro: Why UK taxes should be higher
For your convenience, here are the take-outs:
Cuts in public spending have moved the UK to the bottom of the G7 in terms of spending and taxation. UK public services are in crisis not because they are unusually inefficient, but simply because the Conservative government has chosen to spend far too little on them in order to get taxes unusually low compared to other G7 and major European countries. The Conservatives are going to lose this election badly in part because they continue to prioritise tax cuts over improving public services.
But Labour is no better, promising no tax rises – and particularly no tax rises for the exorbitantly rich.
Which means UK taxes are too low, and a Labour government is going to have to raise taxes to meet both its pledges and expectations about public spending. (The National Institute comes to similar conclusions here.) The question Rachel Reeves and the Treasury will have to answer is whether they can raise enough using the taxes left after you exclude those they have promised to keep at existing planned levels? If not, will they break these election pledges, or will the public sector remain underfunded and the UK remain under taxed?
The public sector will remain underfunded and the UK will remain under-taxed. Reeves will insist that she must stick to her rubbish fiscal rules. The excuse will be that matters are far worse than Labour had been led to believe by the Tories.
Public spending at close to current levels is having a negative impact on economic performance. In particular ever growing NHS waiting lists are restricting labour supply and therefore UK output and incomes.
So health spending will have to increase. But Labour is saying (I don’t believe Keir Starmer or Wes Streeting actually believe it for a moment) the best way to cut waiting lists is to increase privatisation, so let’s kill that stone dead with another excerpt from the Mainly Macro article:
Health spending as a share of GDP has been trending upwards in all the major economies since at least 1970… The top line in the chart above is the US, where spending is so high in part because it is a very inefficient insurance based system.
So, paying private health companies for work on a case-by-case basis is a “very inefficient” use of money. Got that? Good.
Because here comes the elephant in the room:
Increased tax and spending is only useful if the public money it frees is put to good use – and Labour is going to waste health cash on private profit.
(We could go into whether this is because private health firms have been filling Keir Starmer’s and Wes Streeting’s bank accounts if you like, but that’s not necessary when weighing up the effect of their policy on the nation.)
So: yes – we need more taxation, and of the richest in society, in order to re-balance the economy. The public spending this frees should then be spent on public services – and not on giving private companies contracts to provide those services, because they’ll only waste the cash.
Now…
Which of the parties and Independents who are standing in the general election are promoting such a policy?
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Each year the ‘happiest’ nations are those in northern Europe who pay high taxes and rejoice in highly beneficial public services. We are really unhappy and have declining public services. Scandinavian countries operate electoral systems based on proportional representation which give their people a positive choice for their representatives. We have a rigged first past the post system which effectively limits voter power to the two main parties. I’m sure there is sleaze in northern Europe and crooks at all levels but it often seems that we only have crooks!