Vince Cable, the Liberal Democrat spokesman on finance, says he wouldn’t increase total taxes to help deal with huge projected government deficits. Instead he wants “fairer” taxes – meaning the wealthier paying more and the poorer paying less. This is the cry of demagogues across the ages, as Aristotle pointed out two and a half thousand years ago.
There is no limit to proposals for this sort of “fairness”. In any change in total taxes, either up or down, one can always argue that the rich should pay more and the poor less. The aim is often to hurt the rich, rather than to help the poor. Yet the experience of the past two hundred years shows that the poor can gain far more from economic growth than from redistribution.
Cable says he doesn’t want to put taxes up overall. That’s just as well, since total taxes now take nearly 50% of the national income, compared with under 10% at the start of the twentieth century. In fact, for a truly “liberal” economy, we need taxes to come down from their present very high levels. But to achieve that, government spending has to be cut even more.
Government spending currently amounts to about £700 billion a year, with a deficit of some £170 billion forecast for the current year. In order to clear the way for overall tax cuts, without increasing the national debt to unacceptable levels, government spending needs to be cut by at least £100 billion a year. So saving £1 billion here or £2 billion there is not going to make nearly enough difference.
Vince Cable is not alone in being remarkably reticent when it comes to discussing specifics of reducing government spending. Like leaders in other parties, he talks about “tough choices” ahead. But, ahead of a general election, they all seem reluctant to be explicit about what those choices are and which way they would choose. For them, as for St. Augustine, the watchword is “Not yet”.
In the worst public finance crisis for generations, the government has the nerve to use the “difficulty of forecasting” as an excuse for delaying the scheduled triennial Public Spending Review. That’s rather like using stormy weather at sea as an excuse for not using the compass.