Tax and win, say Fabians

A BLAIRITE think-tank is setting up a commission with the aim of breaking the taboo surrounding taxation and convincing the Prime Minister that Labour can win the next election on a tax-raising manifesto.

The Fabian Society is seeking to recover taxation from the Thatcherite belief that governments must be committed to tax-cutting to win elections.

The review is to be carried out by Lord Plant of Highfield, the master of St Catharine's College, Cambridge, who headed a commission under the former Labour leader, John Smith, which recommended Labour to back electoral reform.

"Politically, this remains one of the most sensitive of political issues for the Labour Party," said the Fabian Society. "One of Labour's five election pledges was not to raise income tax rates in the present Parliament. It has become clear in the Government's first few months that this policy is absolutely non-negotiable. Indeed there is a sense in which both inside the Labour Party and to a considerable extent outside it, the subject of taxation has become practically taboo."

The think-tank said the image of a "knee-jerk tax and spend approach to politics was a major contributor to voter disaffection from old Labour". And it added: "In turn, a commitment to keeping taxes low has been one of the defining features of new Labour."

But the demand for public spending, particularly in health and education, continued to rise not least because of the Government's own public commitments. "In this context, a public debate about taxation is long overdue. The Labour Party's sensitivity to electoral and media pressure make it highly unlikely that such a debate will be stimulated from within the Government."

Lord Plant's commission will look at ways of re- establishing public acceptance for higher taxation, possibly through earmarking of taxes for specific projects. It will also carry out a comprehensive review of the structure of the tax system in this country.

Mistrust of governments over their promises on taxation is blamed by the Fabian Society as one reason for widespread public disaffection from politics and political institutions in the UK. "The narrow terrain over which taxation policy has been argued in recent years - focusing almost entirely on headline personal tax rates - has been extremely damaging," said the Fabians.

Tony Blair overruled plans by Gordon Brown before the general election to introduce a 50p income tax band, but ministers believe new ways need to be found to raise taxes for "good causes" such as curbing pollution.

John Prescott, the Deputy Prime Minister, has secured a deal with the Chancellor for raising taxing to curb car use on the understanding that the money will be kept for use on public transport.

Mr Brown is expected to announce plans in the autumn pre-Budget statement for an energy tax on industry if it is backed by a working party under Sir Colin Marshall, former president of the CBI.

Memo to Mr Blair, Review, page 4