Wednesday 18 January 2017

Labour must box clever to stay out of 'tax trap'

Steve Richards

Published 08/04/2010 | 05:00

British Prime Minister Gordon Brown and his wife Sarah take calls from the public at Labour Party headquarters yesterday
British Prime Minister Gordon Brown and his wife Sarah take calls from the public at Labour Party headquarters yesterday

LABOUR has fallen into a "tax and spend" trap for the first time since Gordon Brown took charge of the party's economic policy in 1992. The entrapment explains the widening of the Conservatives' lead and is, for Labour, extremely dangerous. The single issue of "tax and spend" determines the outcome of elections in Britain, often unfairly but always decisively.

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The story of Brown's version of New Labour can be told by the two National Insurance rises he has introduced, the first in his Budget in 2002 to pay for increases in the National Health Service (NHS), and the second that is shaping the early part of the election campaign. The first was announced after painstaking, nerve-shredding preparation. To their great credit Brown and his entourage had concluded the only way that Britain's spending on health could reach the EU average was to put the argument openly for a tax rise.

This was a massive decision for a group of people who had worked on the assumption, after Labour's defeat in 1992, that they could never win again by making a candid case for tax rises. While proclaiming his boldness, Tony Blair was terrified of the political consequences of the move even though he had made the commitment to increase spending to European levels without knowing how to pay for it.

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