Amid the continuing economic paralysis brought on by the global financial crisis attention has lately been focused on the chronic huge imbalance in government revenue and expenditure in the world’s largest economy, the United States. Without some moves to close this gap, it is widely perceived, there is no hope of reducing the enormous level of public debt which, along with equally massive private sector debts, is crippling the economy and threatening generalised bankruptcy. In order to achieve such a reduction there must either be an increase in revenue – through higher taxes – or cuts in public expenditure or some combination of the two. The extent to which the emphasis should be more on direct tax increases (particularly on the wealthy who enjoyed massive tax cuts under the Bush administration) or public spending cuts is a matter of fierce political debate between Republicans and Democrats in Congress, with most Republicans rejecting any tax increase whatever on principle.
Leaving aside the fact that fiscal austerity on its own cannot possibly restore stability (let alone growth) to such heavily debt-ridden economies, what seems striking from a British perspective is that tax increases are at least on the agenda in the US – notwithstanding Republican intransigence. By contrast in Britain, which has an even greater public deficit and debt problem than the US, debate between the political parties or in the mainstream media on how to remedy this dire situation centres exclusively on the extent and nature of the necessary cuts in spending – with the main emphasis on public services, where cuts most severely affect the poorest and most vulnerable in the community. As for taxes, the only significant increase enacted by the Coalition government has been on Value Added Tax, an indirect tax levied on all members of the public equally – and therefore hitting those with the lowest incomes hardest. So far from any proposal to raise direct taxes on those with higher incomes (those best placed to help close the gap) the Coalition has since 2010 favoured them with a cut in the top rate of income tax and a further cut in corporation tax on top of those lavished on them by successive Tory and Labour governments over the past 30 years – resulting in a decline in the top rate of income tax from 83 to 45 per cent and in the rate of corporation tax from 52 to 21 per cent since 1979.
These concessions, combined with the enormous opportunities for tax avoidance provided by the ever more complex regulations and the ready access of companies and wealthy individuals to offshore tax havens, have led to spreading public resentment at the unfairness of the system, particular at a time when the British public is facing seemingly endless demands for greater austerity. This animosity – mainly articulated by ad hoc groups of activists such as UK Uncut, the Tax Justice Network and the Occupy movement – has built to the point where politicians have felt the need to react. Amazingly, however, their response has so far consisted solely of denunciations of a few US-based multinationals (Amazon, Google and Starbucks) for paying virtually no tax on the substantial profits they derive from their UK operations. Understandably, when summoned by MPs before the Public Accounts Committee to answer charges from its Chairman that their failure to pay more UK tax was “outrageous” and “an insult”, the three companies all pointed out that their conduct was in full compliance with the laws laid down by Parliament and with their obligation to maximise returns to their shareholders. Nevertheless, spurred by threat of a consumer boycott, Starbucks announced a decision to make a voluntary extra tax payment of £20 mn over two years – a derisory sum in relation to their hundreds of millions of UK annual sales. As even one Coalition MP was forced to admit, such a demonstration that tax was effectively optional for large corporations makes a mockery of the system.
Despite the ridicule brought on themselves by such pathetic antics no politician from any of the major parties has called for any changes in tax laws or rates to compel either corporations – or wealthy but lightly taxed individuals – to pay more. Nor have there been any demands from mainstream media for any such legislative changes. Likewise even the trade unions, the traditional champions of social justice on behalf of the working masses, are largely silent on this issue, merely echoing vague calls for reduction of tax avoidance loopholes. Such conspicuous cowardice from the British establishment confirms the existence of a political consensus in Britain that the idea of direct tax increases, whether on corporations or individuals, is to be considered taboo even at a time of extreme fiscal crisis; rather it is proposed to extend the grotesquely inefficient and divisive practice of means testing to universal benefits such as child benefit in order to try and close the gap.
Instead of challenging this consensus by calling for redistribution of income via direct taxation the official opposition, the Labour Party (founded and, incredibly, still substantially funded by the unions), is going through the motions of looking for other ways of achieving more equitable income distribution. The latest buzz-word to surface from the think-tanks in this context is “pre-distribution”, a term which party leader Ed Miliband himself and a number of his colleagues purport to take seriously. Yet those who regard sloganising as an inadequate substitute for rational thought will find on closer inspection that the concept has as much substance as the Emperor’s New Clothes and is merely another attempt by its advocates to hide their ideological bankruptcy in pseudo-academic verbiage. For its essence, apparently, is that a) it does not and must not entail spending more public money on benefits of any kind and b) it will mainly involve exhorting private business to create more and better paid jobs for the underpaid and underemployed without putting any pressure on them to do so. Such a stance is obviously of a piece with that which begs companies like Starbucks voluntarily to pay more taxes than they are obliged to. It also fits all too well with the record of a party whose leaders appear comfortable with their public image as “cabs for hire” and which has shown no remorse for its part in the greatest war crime perpetrated by any European government since 1945.
All this demonstrates once again the firm resolve of Labour, along with the other mainstream parties, that no policy change must be proposed – or even publicly discussed – that is at variance with the interests and agenda of the huge and shadowy global big business “syndicate” that effectively dominates the world. Party managers and financial backers are clearly mindful of the widening gulf thus being created between the political class and the mass of public opinion – as shown by their strenuous efforts to fabricate opinion polls purporting to demonstrate that most people think it is right to impose greater austerity on the poor and most vulnerable even as the corrupt financiers whose crimes have reduced the economy to such dire straits not only walk the streets with impunity but continue to be rewarded with high salaries and tax cuts.
The need to deploy such totalitarian methods in order to try and foist this perverse ideology on the public may seem all too logical to a ruling élite resolved to make no concessions to either reason or humanity. For whereas until lately our rulers have clearly felt able simply to ignore public opinion most of the time, they may well now feel that the dangers of serious unrest are such that it needs to be more actively managed – or distorted. A classic example of the more relaxed approach was the unanimous refusal of all three main parties to contemplate renationalisation of the railways at the time of the 2001 election – notwithstanding a series of horrendous accidents following privatisation and opinion polls consistently showing at least 70 per cent of the public favouring a return to public ownership (as it still does). Yet given the growing signs of civil disorder elsewhere in Europe in the face of deepening social deprivation and repression – not to mention the uprisings associated with the Arab “spring” – the authorities may reasonably fear that such disconnect between rulers and ruled will soon become explosive.
The question crying out for an answer is why Britain – or indeed any of the other Western industrialised “democracies” that are heirs to the Renaissance and the 18th century Enlightenment – is unable to conduct an open, pluralistic public debate on what needs to be done to stem the spreading tide of global chaos and conflict before it engulfs us all. While there may be no single factor capable of explaining such ideological paralysis, it is hard to escape the conclusion that the failure to limit the power of big money to buy the political process (including control of the media) is a principal cause – a power perhaps made more dangerous by the tendency of modern capitalism to concentrate vast wealth in far fewer hands than ever before in history.
The effect of these distortions in Britain is that our supposedly democratic constitution is now less representative of the popular will than at any time since before the Reform Bill of 1832, when the franchise was limited to a tiny proportion of the population and those with wealth and connections could buy seats in Parliament without the need to present any policy platform to the electors. Such a reversion to open debauching of our institutions seems bound to lead to calls for drastic reform to make them more genuinely accountable and free them from the corrupting power of big money. But perhaps we may doubt whether any such reform can happen in time to avert social collapse and civil disorder on such a scale as to push us back still further in terms of our history to when conflicts were resolved largely by force rather than the rule of law. Given the manifest obduracy of those in power in the face of looming collapse – and increasing signs of high level lawlessness (not only among the “banksters”) – we are entitled to suspect that they now see such an outcome, with all the monumental suffering that implies, as a price worth paying for them to cling to power a bit longer.
3 January 2013