‘Flat tax? Flat chance’, Guardian, 30 July 2014.

Quizzed on remarks made by Cabinet Office minister Oliver Letwin to the rightwing thinktank Politeia, an unnamed Tory spokesman could not have made himself much clearer: “There will be no flat tax,” he said. “We oppose it. Full stop.” That hasn’t, of course, stopped Labour’s Treasury team, which wasted no time in claiming that Letwin – whose loose lips have sunk a few ships over the years – had let the fiscal feline out of the bag.

The shadow chief secretary, Chris Leslie, said: “You can’t trust what the Tories say on tax. They said they had no plans to raise VAT, and did it after the election.” Now, “not content with having already cut taxes for millionaires, a Tory flat tax would mean even lower taxes for the richest and higher taxes for millions of working people”. To back up its argument, Labour points to the fact that a flat tax was “championed” by the chancellor, George Osborne, 10 years ago. It is right – but only up to a point.

In early September 2005, the Conservative party’s drawn-out leadership contest was entering its final stages and David Cameron, prior to his headline-grabbing speech at the party conference in Blackpool a few weeks later, was far from being the the favourite to win it. Having pitched themselves as centrist modernisers, his team needed to say and do things that would garner some desperately needed support from MPs who wanted a return to Thatcherite verities, and therefore inclined towards either Liam Fox or David Davis.

One of those things was Cameron’s decision to match Fox’s promise to pull Tory MEPs out of the centre-right EPP group in the European parliament. The other was George Osborne – Cameron’s campaign manager but also shadow chancellor – declaring, in a speech to the Social Market Foundation, that: “We need to make the case for lower, simpler and flatter taxes as a distinct alternative to the higher and more complex tax system foisted on us by Gordon Brown”. He added: “A flat tax can be very progressive … A much larger personal allowance would mean that many low-income people are taken out of tax altogether. And those on middle incomes find that a big slice of that income is tax-free.”

Unlike Cameron’s pledge on the EPP, which he wasn’t allowed to renege on by his parliamentary party, and which has arguably contributed significantly to the UK’s alarming loss of influence in the EU, Osborne’s flirtation with flat taxes was quickly forgotten – shunted off into the sidings of a policy commission he set up to advise him on taxation more generally. Despite the fact that it was headed by the uber-Thatcherite Michael Forsyth, that commission rejected a flat tax as impractical. That it did so was actually par for the Tory course. Back in the 1960s, Brian Reading, now of Lombard Street Research, did some work on a flat tax for the party, and it wasn’t considered a runner by those in charge. But if Reading thought it may have been then, even he is dismissive of the idea now. Indeed, when asked about it in 2005, he said it would be “political suicide” because there were bound to be far more losers than winners.

Added to the probability that it might therefore turn out to be some sort of poll tax mark II, the introduction of a flat tax also risks, especially early on, failing to raise as much revenue as the current system – not exactly what an iron chancellor promising to bear down hard on the deficit and debt is looking for.

Anyone who still needs convincing that the Tories won’t be introducing a flat tax any time soon just has to glance at a list of the countries that have introduced it. Some of them, it’s true, are respected – albeit fairly small, new and unfamiliar – liberal democracies. Others most definitely are not. Pointing out that a flat tax has worked in Russia, Ukraine and Hong Kong isn’t, I suspect, going to go down all that well on the proverbial doorstep in Great Britain. Conclusion? Not. Going. To. Happen.


About tpbale

I teach politics at Queen Mary University of London.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s