Leading Article: Labour can't duck tax

'THE OPPORTUNITY for employment is absolutely basic to the good society. We should not consign anybody to a life of unwanted idleness. We should pay for that through higher taxes and borrowing - borrowing when the economy is weak, higher taxes when the economy is strong. It's as simple as that.'

The speaker is J K Galbraith, last of the great Keynesians, in an interview he gave to the New Statesman during his visit to Britain last month. It is an extraordinary comment on John Smith's Labour Party that nobody has the smallest idea whether it subscribes to those sentiments or not. Labour has devoted the past month, almost exclusively, to a vigorous attack on Tory tax rises. This is understandable: to fight an election as the party of low taxation and then to introduce the equivalent of a 7p rise in income tax is barefaced cheek by any standards. But what would Labour do? Shadow Cabinet members regard this almost as an improper question. But the electorate will want an answer sooner or later. Would Labour cut taxes? If so, how would it save money? By reducing spending on health, education and social security? Or would it continue to borrow? The party leadership's repeated insistence that the books would be balanced by higher economic growth is about as convincing as a witchdoctor's promise of rain. Economic recovery, after all, was exactly what the Tories promised in 1992. Labour thinks it can persuade voters to trust it more than the Conservatives. But trust it to do what? The party's mood suggests that it merely wants the opportunity to show that it can make a better fist of Tory policies than the present government.

Many of Labour's critics, internal as well as external, think Mr Smith ought to get himself a Big Idea. But Big Ideas are apt to come along rather less than once in a generation; they cannot be whistled up in the way that cricket clubs used to whistle up fast bowlers from coal mines. In the meantime, Labour may be best advised to go back to the kinds of basics expressed by Professor Galbraith. 'Public expenditure,' he argued in a lecture at Sheffield University, 'is by far the most important issue facing the industrial nations today.' He pointed out that, while the economies of both Britain and America remain sluggish, these countries have an enormous unmet agenda of public needs: schools are crumbling, medical services are struggling to cope with increased demand, thousands are homeless, rail and tube networks are in disrepair, universities are struggling for research funds. Taxation, he said, can 'help correct the normal disparity between frivolous private consumption and urgent public services'. He added: 'Those who propose tax reduction as an economic stimulus are usually concerned with advancing personal pecuniary interest. Improved economic performance is the cover story.'

Labour, by staking so much on an appeal for 'trust' on taxation, implicitly concedes that the Tory view of government is correct: that it is by nature incapable of improving our society and that taxes will inevitably be wasted, bringing no benefit to those who pay them. The Opposition appears, indeed, to believe that there is no prospect of winning back the argument, that the British people are as convinced as their present rulers of the superiority of the free market. But that is almost certainly not the case. For thousands of families, the net outcome of a period when the market was allowed to rip was a mortgage that they could scarcely sustain and which exceeded the value of their home. A few British Telecom shares were no compensation.

On page one today, we reveal details of a consultative paper, drawn up by Shadow Cabinet members from left and right, which suggests that Labour can do better than the Tories in devising public-private sector partnerships to improve transport, health and education. Nothing wrong with that, and the emphasis on the need for capital investment in the nation's future points the way to what should become at least a medium-sized idea for the next election campaign. But it is no use pretending that British companies and financial institutions can be weaned overnight from their chronic short-sightedness. As the Tories used to say, money does not grow on trees. Investment is for the future; to get it, we have to consume less now. In the age of instant credit, individuals are more reluctant than ever to do that. It is up to government to do for people what they will not or cannot do for themselves and it is up to Labour to convince them that this is right.