Why Charlie Elphicke's priorities are wrong

It ought not to be the job of the Conservative party to define ‘fairness’ as “tax everybody, everywhere”. Leave defending that sort of nonsense to Labour and the Liberal Democrats

Britain's problem isn't that its government is not taxing enough
John Phelan
On 20 March 2012 10:09

There is a strand of thought in the Conservative party which holds that the party’s failure to win the last election was because they are insufficiently like the Liberal Democrats or Labour; respectively, a party which has popularity levels that would make Gary Glitter wince and one so bereft of ideas that the only thing they needed to worry about being stolen in a recent break in to its leader’s office was the tea bags.

It is this strain of thought which recently led Francis Maude to say that it was the Conservative party’s stance on gay marriage which would decide its electoral fortunes, a view which suggests he hasn’t spent much time canvassing lately.

It is also this strain of thought that has led Charlie Elphicke MP to write a piece for ConservativeHome titled ‘We should target overseas tax dodgers, help the low-paid and only then abolish 50p

In a country whose government is borrowing £450 million per day, whose national debt is rising at £4,000 per second, yet which is seeing the merest trim of government spending Mr Elphicke has deduced that the problem is not that we are spending too much, but that we are not taxing enough.

At the heart of this lies what has motivated much of the opposition to the coalition’s attempts to get Britain’s ruinous borrowing under control: the idea that things can carry on as before; all we need to do is find someone else to keep paying for it.

The twist in Elphicke’s argument – what sets it a couple of millimetres apart from the sort of thing you get from any number of Dave Sparts – is that instead of targeting ‘the rich’, however defined, Elphicke has non-doms in his sights.

“We should learn from these international lessons” Elphicke thunders. Which international lessons? Well, there’s Spain with its 23 percent unemployed and the United States which, Elphicke notes approvingly, doesn’t “sit there worrying about non-domicile status. They just tax everybody, everywhere”

Well, they haven’t been taxing the increasing number of Americans who have been renouncing their citizenship rather than stump up to two countries’ governments when they only live in one. And Elphicke doesn’t address the rather obvious point that we might actually want to attract these people. He says that “This measure (taxing non-doms on their worldwide income not just that earned in the UK immediately) would raise between £500m and £1bn” annually, one or two days government borrowing in other words. But he doesn’t say whether this figure takes into account the negative effect on inward investment this would have.

As the Telegraph reported, when the £30,000 levy on non-doms which Elphicke celebrates was introduced in 2007, 16,000 of them upped sticks and left. As the Telegraph said

“The latest Treasury estimate is that 5,400 non-doms paid the levy in its first year, worth £162m in tax – way below original estimates. But how much revenue did the Treasury lose by the 16,000 non-doms leaving?

 Well, again according to Treasury estimates, non-doms pay £4bn in income tax and another £3bn in other taxes such as capital gains, VAT and stamp duty. So if 11.5pc of non-doms left in 2008-2009, as Inland Revenue figures show, then it's not unreasonable to estimate that must equate to about £800m in lost taxes”

Can our battered finances really afford a repeat of this fiasco? They might have to. Just this last weekend the Financial Times carried a report that the number of non-doms in the UK has fallen by 16 percent since the levy was introduced. Now George Osborne is rumoured to be planning to raise it to £50,000.

If there’s no economic logic to all this neither does Elphicke even attempt to offer a moral justification. But then he appears to subscribe to the other foundational myth of the ‘anti cuts’ movement, namely that all government spending is good and, therefore, so is all tax. Tellingly, Elphicke makes no mention of spending cuts in his article.

But the truth is that there is much government spending which is a complete waste, especially following Labour’s spending spree over the last few years.

Labour more than doubled spending on education but we slumped from 7th in reading, 8th in maths and 4th in science in 2000 in the Programme for International Student Assessment rankings to 17th, 24th and 14th respectively in 2008. Labour doubled spending on health but productivity, at best, only “probably improved”. It’s little wonder that people aren’t simply sitting still to be taxed to pay for all this waste.  

Rather than dreaming up probably self defeating plans to find new pips to squeak Elphicke would be better off attacking this colossal misuse of taxpayers’ money. The truth is that there is much public spending which is not virtuous and, by extension, there is much taxation which is not virtuous. Some tax, quite frankly, ought to be avoided.

Elphicke is correct that moves should immediately be made to make the first £10,000 earned tax-free but this should be paid for, not with further taxes, but with genuine cuts to runaway government spending, not the glorified budgetary topiary which is the cause of so much misguided fuss.

Elphicke says that “As Conservatives we are committed to fairness and social justice”, well, who isn’t? The real question is what form you give these malleable phrases. He says “That means we believe everyone should pay a fair share” – again, who would disagree?

But it ought not to be the job of the Conservative party to define ‘fairness’ as “tax everybody, everywhere”. After all, besides wooly phrases like ‘social justice’ and ‘fairness’, the Conservatives are supposed to believe in the sovereignty of the individual and over his or her rights over their property. This is especially so when so much of this tax goes to support wasteful spending.

Leave defending that sort of nonsense to Labour and the Liberal Democrats.

John Phelan is a Contributing Editor for The Commentator and a Fellow at the CobdenCentre. He has also written for City AM and Conservative Home and he blogs at Manchester Liberal. Follow him on Twitter at @TheBoyPhelan

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