A little honesty from Labour would go a long way to saving the welfare state

FROM time to time a new "truth" is universally acknowledged and it floats into the political ether, a bubble emanating effortlessly from the lips of well-placed citizens of left and right. The New Year axiom in danger of embedding itself in the political psyche is this: We Can No Longer Afford the Welfare State.

But every word of this apercu is doubtful. Who is the "We"? Presumably those who do the paying, not those who receive the benefits. Then there is "No Longer" - but what has changed, and when was the last time it was affordable? Most problematic of all is "Afford" - a relative, subjective and slippery concept if ever there was one.

Sir Geoffrey Holland, an endearingly outspoken former permanent secretary at the Departments of Employment and Education, often critical of government policies, joined the assault on the social security budget last week - another alarming straw in this same ill wind. He said the benefit bill is "now so large - two out of every three central-government public-expenditure pounds - and so rapidly growing" that "every other public expenditure programme is a residual. Each is fighting, as it were, for the scraps that fall from the DSS table."

In fact the pounds 90bn social security bill represents less than a third of total government spending. Sir Geoffrey managed to frighten his audience by leaving out local government spending and making it two-thirds. However, it is still a huge sum. I asked him what part of it he thought could be cut. Well, none, actually, or only in the very, very long run, was his reply.

That is because by far the biggest item is pensions, which account for almost twice as much as is spent on the least popular item, Income Support for the indigent. Frank Field and others who propose shifting a large part of welfare into compulsory private schemes are simply finding more palatable ways to tax people: disposable income will be the same whether they pay into the exchequer or into a private scheme for unemployment, sickness and care in old age. But popular support for the welfare state remains very high indeed, with 90 per cent wanting more spent on the NHS and 75 per cent wanting more for education. Nor is there any sign that voters would tolerate loss of social security rights, such as pensions and sickness benefit. Think of how upset the middle classes have been about having to pay for their parents in old people's homes.

Politically, as even Peter Lilley has found, it is virtually impossible to make significant cuts in social security. More fraud could be detected, pensions and child benefit for the richest could be cut, but these are small beer. The whole welfare state remains unassailably popular, so why is everyone suddenly saying we can't afford it?

Because the second part of the current bien pensant mantra says Read My Lips - No one Will Ever Vote for More Taxes. This is New Labour's deepest conviction, the foundation stone of all its policies and possibly the hard rock against which many of its nobler ideals will founder.

It makes Labour sound as if it had joined the ranks of the free-market Adam Smith Institute, which sent out its usual New Year greetings with the wittily alarming calculation that "Tax Freedom Day" will fall on 21 May: in other words, the average family will have to work until that date for the Exchequer before they begin to earn for themselves.

Also last week came the Central Statistical Office's annual assessment of distribution of income: the top fifth earns 20 times what the bottom fifth earns. But once the redistributive effects of tax and benefits are factored in, including health and education, then the top fifth ends up with only four times more than the bottom fifth. One right-wing paper seized with joy upon these figures, claiming, "The best-off pay a hugely disproportionate share of their income in taxes to fund handouts to the poor".

So here we have several snapshots of Britain that suggest we are labouring under punitive taxes, the worthy earners burdened by a colossal albatross of the feckless. But there are other ways of looking at the same figures. In Europe, only the Greeks pay less tax than the British, and even they have a higher top rate. We pay 37 per cent of GDP, while virtually all the rest contribute much more, between 10 per cent more (Germany, France) and 15 per cent more (Belgium, the Netherlands). The US and Japan pay less than us but if we add in the cost of their private health and education they pay roughly the same.

We are a very low tax country indeed - far too low - and the evidence confronts us on all sides. Comparing ourselves with our neighbours, our 16-year-olds are less than half as educated as the Germans and the French, and then we wonder why. We find dirt and squalor in public places; one in three children is now very poor compared with one in 10 15 years ago; and we fear those housing estates that breed crime. We are left full of civic unease.

The Labour party, trapped in its No New Taxes mode, flails around in search of "values" that cost nothing. So it celebrates "community", as if our sprawling urban populations were suddenly going to turn themselves into self-policing little socialised villages. Community, though, starts at the top because the most important communal thing we do is pay our taxes. The electorate is not altogether to blame for facing two ways on this subject, because our leaders have bought our votes for so long with promises of a free lunch. However the recent British Social Attitudes Survey showed that 58 per cent of voters say they would pay higher taxes to fund the welfare state. Even 51 per cent of those on high incomes say they should pay more.

This, Labour says, is a famous old elephant trap they have no intention of falling into again. Asked by polite pollsters knocking on their doors, of course people give the decent answer but, in the privacy of the polling booth, they vote with their wallets. The success of the last-minute Double Whammy campaign by the Tories at the last election is branded deep into Labour's memory.

But are they right? Bob Worcester of MORI, the polling company, says they are wrong. To be sure, a swing in the last days of the campaign did help to lose Labour the crown. But MORI research shows it was a very small number of people who were influenced by the Double Whammy, and tax was only the fifth reason for not voting Labour. Only 18 per cent of voters said they didn't vote Labour because of tax - and they were overwhelmingly Tory anyway. The disastrous Sheffield rally was much more important. With Labour likely to enter the lists in a far stronger position, that tiny margin is highly unlikely to matter.

So Labour risks tying its hands needlessly in no-more-taxes bonds. One Labour frontbencher said to me not long ago that he despaired of honesty: the only way to win was to lie and cheat about taxes, the way the Tories did. Perhaps when Gordon Brown arrives to open the Treasury books, he will throw up his hands in mock horror at what he finds and proclaim those desperately needed extra taxes for health, education and the inner cities after all.

But honesty matters. The electorate is infantalised by politicians who make snake-oil promises that they can have it all at absolutely no extra cost. Labour will no doubt hammer the parlous state of the NHS and education during the election, but why not tell the truth about the cost? This is not naivety, but expedience. Fear of a secret Labour taxation agenda would be dispelled by telling people openly that they will get what they pay for in public services.

Neal Ascherson is on holiday.