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Clare Short

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Articles

Do we pay too much tax?

We ought to follow the Scandinavian example when it comes to taxation, providing we first reform the highly-centralised, target-ridden and demoralised public services. 

thomas_admin on 14th August 2008
Article originally published in Private Banking Magazine | 01-May-2008

No one likes paying tax. But everyone agrees that there must be a tax system in order to fund the services required by a civilised society. In the OECD countries the average GDP taken in tax was 36.2% in 2005 (the latest year for which complete figures are available). The tax take ranges from 19.19% in Mexico to 50.7% in Sweden. The UK came in at 36.5% which was just above the average and compares with 37.6% in 1985 when Thatcherism was in full stride and tax cutting central to that ideology.

​So, in practice the debate about desirable tax levels in the more developed OECD countries, ranges between almost 40 and 50 % of GDP. There is an important debate to be had about the distribution of the tax burden but that is not the subject under discussion.

​It is of course impossible to pick a figure and assert that it is the ideal tax level – although Roy Jenkins did say in 1976 that you cannot push public expenditure significantly above 60% of GDP and retain the values of a plural society with adequate freedom of choice. This may well be the case but since no one is advocating such a rate of tax, it does not take us very far.

​An easier way to ask ourselves the question is to look at different societies across the world and ask which is the more attractive model. Many people in the UK – not least the leaders of New Labour – take the US as their model. The US tax take in 2005 was 28.2% of GDP. For myself, I find the US alarmingly violent and unequal. I am constantly shocked by the people who beg i their public places and am astonished that the people of one of the richest and most powerful countries in the world have been willing to put up with such an inadequate health care system for so long. In contrast, the Scandinavian countries are less unequal, less criminal and violent, have higher achievements in healthcare and education and extremely efficient economies.

​My short answer to the question of desirable tax levels is that I would prefer the UK to be more like Sweden and less like the US and if that means 50% rather than 40% of GDP being taken in taxation, I am happy to pay that price. But I must qualify this conclusion. Quantity does not necessarily deliver quality and I would not support an increase in taxation to feed the present model of highly centralised, target ridden, bureaucratic, demoralised public services. A willingness to spend a higher percentage of GDP in taxation is a necessary but not sufficient condition of the more civilised social model that I favour. I am sad to say that the concentration of power in the Prime Minister’s office, weak Parliament, unrepresentative electoral system and obsession with media management, has created a growing incompetence in the British system of government. This problem needs urgent attention, but this question goes wider than that of the desirable levels of taxation.

My final point is that we are moving into a new phase of human history. The end of the eighteenth century brought us the industrial revolution and the promise of continuing economic growth that would in time bring benefit to the whole of humanity. The crisis of climate change and other environmental strains means that the promise of ever expanding material wealth will be brought to an end. In order for the world to survive the enormous challenge of this change, there will need to be greater equity across the world and within countries. We will need to look to provide the necessities of life to all and then find the meaning of our lives in non material goods – such as music, poetry, spirituality, nature, a spirit of community and a general satisfying quality of life. To manage this change and refocus our societies we will need to be willing to spend more of our GDP investing in the services of a civilised society rather than insist on our right to spend more of our money on individually purchased consumer goods.

 

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Clare Short was born in Birmingham in 1946. She became MP for Birmingham Ladywood in 1983, subsequently serving as Secretary of State for International Development (1997-2003). Since leaving Parliament she has worked as chair of numerous non-governmental advocacy groups working with communities across the developing world.

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