Why the parties have to get over their fear of talking tax rises

In British election campaigns, tax has become what American politicians call a third-rail issue – touch it and it will kill you. In the 2015 campaign it has only been mentioned by the parties to attack opponents and scare the electorate.

But the failure to discuss the costs of the extra spending the parties are now so freely promising is at the heart of the electorate’s loss of trust in politicians. Most of the parties claimed to have produced fully-costed election manifestos, but few have stood up to scrutiny from outsiders. More money for the NHS comes alongside generous tax offerings rather than tax hikes.

Failing to cost spending commitments can reduce support rather than increase it, since voters are fully aware that spending comes with a price tag. When parties trumpet spending commitments but are as silent as Trappist monks on the issue of how they are to be paid for, it undermines their credibility.

One of the reasons for this stems from the 1992 general election when Labour’s shadow chancellor and subsequent leader, John Smith, decided to spell out in considerable detail the tax and spending commitments of the party during the election campaign.

He believed it to be the best way to deal with the accusation that Labour was a spendthrift party that couldn’t be trusted on the economy. In the event, the Conservatives countered with a very effective poster titled “Labour’s Tax Bombshell” and accompanied it by a lurid campaign claiming that the party would massively increase taxation if elected.

At the start of the campaign Labour was ahead in the polls and thought to be very likely to win, but John Major won in the end. During the election post-mortem, party strategists decided that sensible discussions of taxation during an election campaign were to be avoided at all costs.

But research shows voters are perfectly capable of expressing a view on spending and tax.

Who does tax best?Paul Whiteley, Author provided

The chart details responses to a set of questions in the Essex Continuous Monitoring Surveys about the trade-off between taxation and spending. The preamble to the questions states:

Using a 0 to 10 scale, where 0 means that government should cut taxes a lot and spend much less on health and social services, and 10 means that government should raise taxes a lot and spend much more on health and social services, where would you place yourself on this scale?

In addition to scoring their own preferences, respondents are asked to score where they think the political parties are located, and these average scores appear in the chart.

They are based on all of the surveys conducted between January 2014 and March 2015, giving a very large sample of nearly 16,000 people. On average voters locate themselves at 6.0 on the scale. In other words, they are more inclined to want extra spending even if it means higher taxation than to want the opposite.

The smaller parties, with the exception of UKIP, are seen as being closer to the average voter than Labour or the Conservatives. The closest party is Plaid Cymru which also scores 6, followed by the Liberal Democrats scoring 5.9, and then the SNP on 6.3. Labour scored 6.4 on the scale and the Conservatives 5.1. Finally, UKIP was the furthest away from the average voter with a score of 5.0.

There are theories of voting which argue that individuals will vote for a party which is closest to them on issues such as taxation and spending. Sure enough, statistical modelling confirms that the closer a respondent is to a political party on the scale, the more likely they are to vote for it, after taking into account a number of other factors that influence the vote.

It is interesting that the Conservatives are about three times further away from the average voter than Labour, and this fact will harm them in the election. This is one of the reasons why the party is finding it hard to profit politically from the improving economy.

The decline in trust in politicians means they have to revisit this prohibition on discussing the costs of spending commitments.

The Conservatives are squandering their undoubted advantage on the issue of economic competence by spraying around unfunded spending commitments in the election campaign. It should be said that none of the other parties are being honest about this issue either, but the Conservatives have made significantly more unfunded commitments than their rivals.

What parties need to do is to spell out in detail the cuts, borrowing requirements or tax increases that are needed to raise the money for extra spending. It is not enough just to claim that these spending commitments are fully funded. The claim has to be endorsed by a trusted source such as the Office of Budget Responsibility or the Institute for Fiscal Studies.

Times have changed since 1992. Parties now face a more educated and more cynical electorate. The real third-rail issue in this election is not tax or spending, but failing to talk about either.

Disclosure

Paul Whiteley receives funding from the ESRC.