Dead Men Left

Wednesday, September 07, 2005

Flat tax, flat earth

George Osborne is an irritating creature:

Shadow chancellor George Osborne says Britain should investigate the merits of a "flat tax" - where everyone pays the same rate regardless of earnings...

Mr Osborne said he accepted that the Tories had not "made an economic argument" for tax cuts at the last three general elections, or that they would deliver jobs and prosperity.

Osborne's argument is that the Tories just love cutting taxes. They just haven't persuaded the rest of us it's such a neat idea. In order to do so, they're going to sit down and work out what the consequences of cutting taxes will be, and then tell us all about it.

It's as perverse as a party telling us they want to raise taxes - and then thinking about what to do with the extra cash. Instead of using the tax system as a means to an end, Osborne and friends see it as an end in itself. It is, simply, an ideological preference for them.

The usual suspects have attempted to disguise flat taxes as sensible realpolitik. We can remove bureaucracy, improve efficiency - and, by increasing perosnal allowances, do something for the poor. Who but a miserly conservative would stand in the way of the flat-tax revolution?

But these Che Guevaras of the Adam Smith Insititute are covering up a big secret. There are only two groups who may benefit from a flat tax system: some, most likely not all, of the lower-paid workers; and virtually all those on higher incomes. A huge lump in the middle, currently taxed in a vaguely progressive fashion and recipients of significant benefits, could find themselves losing out.

An alliance of the idle rich and the working poor is not going to deliver an election victory. The Tories have, once before, defeated an unpopular Labour government by mounting an ideological offensive of the kind Osborne wants. No doubt the hope, still, is that a pastiche of Thatcher's Second Coming will wash a Conservative into Number 10.

What the glittery-eyed ideologues in today's Tories fail to realise is that, yes, a serious ideological battle was mounted by Thatcher; but the Tories won in 1979 because the ideological assault they promised had some appeal to large numbers of voters.

There are no reasons to think that grand schemes to simultaneously cut public expenditure and increase the tax burden faced by millions of voters would have the same impact.

Osborne, like other front-bench Tories, was (and is) determinedly in favour of the war in Iraq. The Conservatives appear dizzyingly aloof from ordinary voters: as Third Avenue says, we have an opposition party that "plans to remain in opposition for a very, very long time." What a terrible shame.