The FishTank

If there’s one word the parties have attempted to stamp through this election like Brighton Rock it’s ‘fair.’ Taxes have to be fair, cuts have to be fair, even the voting system has to be fair. And it’s this kind of language that feeds disengagement – not because people don’t want fairness, but because it’s what the Americans call ‘apple pie politics’, where a politician uses a touchstone that nobody in their right mind would argue against – the importance of family, a stable economy – and then by overusing the word tries to imply the opposition is opposed to it. This is contrast to the other overused word, ‘change’ which only resonates when there is a feeling that we’re going to Hell in a hand-basket and people might quite like to get out before the wicker catches fire.

The trouble with fair is that everybody has their own view of what it means. So you hear public sector unions peddling the line that it’s unfair that the failure of a few bankers should cost them their jobs. It’s a stupid argument, partially because we already had a record deficit before the credit crunch, but mostly because a large chunk of the public sector spend before the crunch was coming from those same bankers. Did we hear them complain that it was unfair they were being taxed to pay for whinging bureaucrats? Of course not. That’s not to say they didn’t complain, of course, but for some reason the papers are more likely to report what unions say than banks…

And you hear various pressure groups saying that cuts in their favoured areas would be unfair to someone. Schools, the police, theatres, everybody, it seems, except the Egg Marketing Board (who presumably only get reported in one of those weird papers on Have I Got News For You) claim that their slice of the pie is critical for fairness. All of which makes it more than likely that any government will put some taxes up. It’d be nice to think that we could do the same as Canada, rebalance our public and private sectors with a real war on waste, but back in the real world it seems a dim hope.

And taxes are even more contentious. The Lib Dems have majored on the idea that the tax system is already unfair; that the poor pay a larger proportion of their income to the taxman than the rich. Even after the BBC systematically demolished this argument, they still stick to the line. I won’t repeat the arguments for that here, suffice to say that the Lib Dems don’t include the amount the poor claim in tax credits when they are doing their sums.

No, the myth being peddled without argument now is VAT. Labour insist the Tories will raise it: not because they’ve seen any evidence, but because they’ve done it before. None of the parties has ruled it in our out, largely because they can’t. One of Labour’s most insidious acts under Gordon Brown has been to suppress any form of public spending review. Brown has been waiting from day one to call an election the moment he thought he could win it, and publishing figures that demonstrated how he has systematically wasted the public money (especially since he couldn’t blame it on a predecessor for whom he served as chancellor) would have been to hand serious electoral points to the opposition – which is why David Cameron has had to rely on anecdotal evidence for waste in his TV debates.

But is VAT actually unfair? When John Major first taxed fuel payments, the furore suggested that pensioners would be dying in their homes. Labour, rather than repeal the measure, responded with their highly politicised winter fuel payments scheme, a typical measure to garner headlines whilst only helping the minority. But if VAT went up now, it is likely that only those goods that are fully VAT rated would qualify for the rise. Fuel would not be affected. Would the poor really lose out?

Let’s take an illustrative example. How would an average low-earner be likely to spend their money. Let’s put them on £15,000 – lower than average, but not unusual for someone in a menial public sector job or working a forty hour week in retail. After tax, £15,000 is £1022.85 a month. Average rent on a small flat will range between £300 and £400. This isn’t VAT rated. Council tax will add at least another £100 to that, and fuel bills (rated at the lower level) could be another £50. Food, for the most part not VAT rated would take another £150 – £200, assuming the person doesn’t live on ready meals. Taking just those elements, that’s already £600 – £750 of earnings. Add the usual home insurances, life insurances and pension payments, and our average low-earner could be left with only £100-£200 of disposable income, which is then their entire exposure to normal rate VAT. If they’re running a car inside that bracket, then most of their VAT will be on petrol and they will have been impacted as much by the Government’s fuel duty escalator as by any VAT rise.

Because the truth is that neither the poor, nor the very rich are particularly exposed to VAT. VAT falls most heavily on consumer goods and luxuries. The very rich buy these, but without using much of their disposable income; the very poor buy them only when they can, and tend to buy cheaper versions. It is the middle-earners, the people who can afford a new wardrobe every year or a new three piece suite when it takes their fancy who will suffer the most if VAT goes up.

That’s not an argument to say it should, of course. Because the biggest myth of all in this election is one I’ve alluded to already – that public sector jobs should be sacrosanct and that the workers should consider it unfair that their jobs be at risk in the crunch. Look at those figures for our low earner again and you’ll see that he’s losing £2,700 a year in direct taxation. If that tax were really all going to schools, hospitals and police, then that would be fair enough.  The truth, however, is that a great many public sector roles are either surplus bureaucracy or pointless quangoes. It can hardly be considered fair that the poor are expected to cover the cost of either of those.