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Monday, May 23, 2005


Ritual sacrifice

From this BBC report comes the depressing news that Simon Hughes has joined the chorus that is blaming the policy of local income tax for the Liberal Democrats' "disappointing result" in this month's general election. This is such a stupid thing to say.

Let's leave aside whether you happen to think this particular policy was good, bad or indifferent. Elections and voting behaviour are complex things. If you want to make sense of the Liberal Democrat performance rather than score cheap points, then you need a calm, reasoned and sophisticated analysis. Hughes's simplistic explanation, on the other hand, is based on a flawed analysis and will encourage a misguided response.

The loss of the highly-marginal Guildford seat, in particular, is being blamed on local income tax. Those Liberal Democrats who argue this have failed to explain how the Lib Dem majority was increased in the equally affluent Twickenham, how the Tories were defeated in the equally affluent Solihull, or how the Liberal Democrats achieved a nationwide swing of 1% away from the Tories.

The party's overall performance was predicted pretty accurately by both the opinion pollsters and the betting markets, long before anyone in the Liberal Democrats thought that the party's flagship policy of local income tax was a liability. This suggests that other factors were at work. Might the real problem have been the unfounded optimism of MPs such as Hughes, who went on the record to predict 27 gains?

For a policy that some MPs now claim is flawed, local income tax was embraced with remarkable enthusiasm before the election campaign. The leadership and the MPs not only endorsed this policy but chose it as one of the "10 Good Reasons To Vote Liberal Democrat". They also made it the centrepiece of the party's major
Axe the Tax campaign in the run-up to the election. None of the MPs were complaining then.

The policy of local income tax was not a flash in the pan but was adopted long before the general election. It remains splashed all over the party's
official website. It would not have been inserted in the manifesto even as a minor footnote without the full agreement of the party leader and the parliamentary party. I am aware of no dissenting voices until after polling day.

What was clearly wrong was the party's failure to rehearse and defend the policy adequately. The leader didn't understand it properly and famously
forgot the details at one of his election press conferences. Had he been able to explain it as competently as his colleagues Vince Cable or Ed Davey, it is doubtful anyone would be panicking now.

Besides unfounded optimism about the election result, the other real problem is that the Liberal Democrats in general and the Lib Dem MPs in particular have not adjusted to a situation in which their policies are subjected to serious scrutiny and attack. This change ought to be recognised as a sign that the party has joined the big league, not treated as a cue to dump any policy simply because the party's opponents criticised it. But it does mean that the party needs to operate an effective rebuttal operation, something it failed adequately to do this time.

You do not need to be a political genius to realise that proposing to replace a flat tax with progressive taxation will create winners and losers. You do not need to be a soothsayer to anticipate that such a policy requires careful handling.

Unfortunately, most people prefer simple explanations and simple solutions. What is most likely to happen is that the party will unceremoniously dump local income tax and pillory Ed Davey, the architect of this policy. The ritual sacrifice having been made, the party will resume business as usual.

PS: The Simon Hughes story also appeared in Monday's press, including the Guardian and Scotsman.

I'm a supporter of Local Income Tax, but think it needs some refinement - if only because as it currently stands it requires a huge amount of the 50% top-rate tax revenue to smooth its path. That seems to me a poor use of such funds.

I'm not sure Council Tax can be classed as a flat tax, though. Flat taxes are related to ability to pay (ie, everyone pays 17% of their income), they are simply not re-distributionist.
Council tax definitely isn't a flat tax - LIT is one (everyone pays 3.75% of income or whatever rate is set). A progressive/redistributionist tax is where the rates go up on higher income (like national income tax at present).

I'd be sorry if we dumped LIT.
Isn't Simon Hughes merely saying that the LIT wasn't presented too well? E.g. it was made to sound as if the rate would be 3.75% full stop.

Actually I'm not sure what the article's trying to say. SH might have been misleadingly quoted.
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