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Labour isn’t thinking

23 September 2014

Ed Miliband’s plan to pay for the NHS with a mansion tax encapsulates so much that is wrong with politics today that I make no apology for reverting to some of the themes it raises. (In previous posts, among them this one, I have explained how the mansion tax could lead to some people facing an effective tax on income of over 100% and being forced to sell their homes, and why the assurances of protections should not be believed.)

Firstly: his sums don’t add up. The mansion tax is levied on such a small pool of homes that, however severe the individual burden imposed upon them, the tax can never raise enough even to cover the cost of state-of-the-art drugs. But in fact other measures Ed Balls has outlined, involving a slower repayment schedule for government borrowing, raise twenty times as much cash, as would a few pence on the top rate income tax. The mansion tax is a cynical policy about capturing votes, manipulating the arithmetic incompetence of voters who think that those in possession of a £2m house must have the lifestyle to go with it, and are not intensely relaxed about this.

The NHS is a bottomless pit which no amount of money will fill – although the promise of more money will appeal to the hearts and emotions of those (including myself) who use the service and are shocked by the return of indefinite waiting times at A&E. But money is only part of the reason why the NHS is dysfunctional. Incompetent politicians and inefficient management are at least as much to blame.

A Labour party led by a left wing visionary might have been expected to think harder about the real causes of the NHS’s problems before simply promising to get out the cheque book. Why are drugs too expensive to buy? Is there a different way of underwriting research and development that could capture more of the drugs companies’ profits for the public good without removing their entrepreneurial spirit? Of course Tories say no: the only motive they understand is money, so you must let Big Pharma retain huge profits (paid for by the NHS) otherwise their boffins will lose interest in the laboratory. A Labour party should be challenging that philosophy, not taking it as read.

Why are medical negligence costs out of control, when the cost ultimately is met by all of us? Aren’t there simpler ways of protecting those who suffer medical misfortune, and better ways than insurance of achieving best practice? Why are simple tasks of running hospitals efficiently, building them intelligently, procuring equipment effectively so systematically bungled (and always at our expense)? Has this got anything to do with the fact that, for three generations, top talent among university graduates  has been sucked into the City?

Those are the sort of questions Ed Miliband should be asking. Instead he has resorted to the demagoguery of hypothecation: linking one type of revenue with a specific expenditure. And to add insult to injury, he does so in the name of fairness. That word appears on the heading of my blog, and Mr Miliband needs to demonstrate a better understanding of what fairness is.

Hypothecation is unfair because the muddled thinking confuses the allocation of resources. It is the total cost of all the Government’s expenditure that matters, and that determines the total amount that should be raised (through borrowing or taxation). How the burden of a mansion tax ranks against income tax or stamp duty or VAT should be determined by cool logical examination of the impact on individuals and society as a whole: to infect that debate with the contagion of NHS emotions is a disgraceful failure of political debate.

Ed Miliband’s father will no doubt have taught him as a small child that in Socialism, these burdens are shared on principle of “From each according to his ability, to each according to his work”, while under Communism, “From each according to his ability, to each according to his need.” Miliband has now invented a further declension: “From each according to our misconception, to each according to his vote.” The state was supposed to have withered away with the second slogan: let us hope Miliband withers away before he gets a chance of imposing his particular form of spite.

From → Justice, Politics, Tax

  1. I have a number of disagreements with this, but a relatively uncontroversial one is that pharmaceutical companies are not wildly profitable, and that the real subsidy comes from the US where drugs are much more expensive because there is no effective central purchasing power. The UK (& rest of world for that matter) gets its drugs relatively cheaply, subsidised in part by bloated US healthcare costs.

    It’s also not clear to me that any hypothecation was being proposed. He was identifying a new revenue source to cover new expenses, but that’s not the same as committing to hypothecation – which I agree is daft.

    And whilst I agree a mansion tax is arbitrary, housing is hugely under-taxed in the UK relative to other jurisdictions, and the effective cap on council tax adds a regressive element.

    But please don’t take any of that as support for Miliband!

  2. I wasn’t proposing to enter the debate about drug costs (a highly complicated question), but rather to indicate the sorts of issues that Labour should be thinking about from their own perspective before simply throwing (my) money at it. I agree that the proposal was hypothecation by rhetoric, not law: which is why I regard such debate as unsatisfactory. And I even agree that council tax should be revised: it’s just that I don’t think imposing a 3000% increase in any tax for any individual is a reasonable way to change the tax system. As the Times article this morning made clear, Labour haven’t a clue how they are going to impose this, and the idea that only 1% of householders will get relief indicates precisely the kind of hardship that may result from this policy. I am as opposed to the bedroom tax too: neither takes account of ability to pay, which even Adam Smith recognised as vital to fair taxation.

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