Roll on the election – only afterwards will we have a sensible debate on tax

The Budget turned up the heat on the debate but was ultimately modest in its tax cuts and insignificant in its tax rises. The looming general election ensured the latter, while the centrepiece tax cut secured front-page coverage by appealing to our dominant homeownership culture. While taxation will no doubt feature loudly during the election campaign, it will be after votes have been cast and the next government is securely settled in that the issue is likely to take centre stage.

What direction might this debate take?

Of course, it depends which party is in power and for the purposes of this article I’m going to assume a Labour government is returned – no longer the dead certainty it once looked like. Most analysts agree that more tax revenue is needed if the chancellor is not to break his fiscal rules, although the Treasury itself is sticking to its guns that this is not the case. When you consider the resources needed to advance the government’s social policy agenda, however, then the Treasury’s line is hard to swallow. If further progress is to be made in tackling child poverty or in building new social housing to ease homelessness, then money will have to come from somewhere.

As the Conservatives have illustrated, efficiency savings could be made. Or priorities could be shifted and resources moved between different areas of need. This will all add flavour to the debate – but it won’t change the fact that taxation will have to be at the heart of it.

The 2002 Budget marked a turning point in this government’s approach to taxation. Until that time, there had been reticence about admitting the need to raise taxes in order to provide better services. Labour came to power claiming it had shed its “tax and spend” image.

The increases in national insurance in the 2002 Budget to fund investment in the NHS broke the taboo. The chancellor chose to increase national insurance rather than income tax to soften the blow in people’s perception.

There has been renewed interest in advancing neighbourhood governance – perhaps people could be given greater control over how taxes are distributed in their communities

So is the British public game for further tax rises to fund social change? There are reasons to be optimistic. The annual British Social Attitudes survey, carried out by the independent National Centre for Social Research, consistently reveals that a large majority of people support increased spending on “health, education and social benefits”, even if this means higher taxes.

The findings of a tax commission set up by the left-of-centre think-tank the Fabian Society, published in 2000, also made interesting reading. The commission highlighted a sense of “disconnection” that people felt between the taxes they pay and the services the taxes pay for. It made two main recommendations for bringing about a reconnection: better information and hypothecation – committing a tax revenue stream directly to a specific spending priority.

There has been recent renewed interest in advancing neighbourhood governance, with decision-making perceived to be not as local as it could be. Here, too, there might be an opportunity for reconnection – perhaps people could be given greater control over how taxes are distributed in their communities. The strategy unit in the Cabinet Office – a sort of internal government think-tank – produced a strategic audit just this month, which found that, at a local level, people’s priorities focus on the quality of the local environment and liveability issues – activities for teenagers, transport and public space.

A pre-election campaign is unfortunately not the time to have a sensible public debate on taxation. Once a new government is in power, perhaps this can begin. There is a need to have a more open and honest debate about tax and further the linking of tax and spending in the minds of the public.

But there is clearly a long way to go before political parties can be confident that raising issues such as a tax on housing wealth, or increasing direct income taxes, won’t amount to political suicide.