The Sunday review: The 2020 Tax Commission and the Beecroft report

by Anthony Painter

I like mango. You may not be interested in that fact but I think you should be. It’s not just a taste or preference, it’s a potential public good. I’m not going to leave it at simply enjoying the odd glass of mango juice or a mango half now and again. I’m going to use my love of mango to transform our economy and society. Just you watch me.

First of all, I’m going to get together with other mango lovers and we are going to explore the ways in which mangoes can change the world together. We will talk about the health giving benefits of the fruit, the positive economic impact of expanding consumption and production, the moral benefit to be derived from its consumption and the civic advantages of building a real discourse around mangoes. We will then set up a Mango Commission and ask independent experts to come up with a plan to promote the mango through public policy.

This commission will show how mango consumption can replace international aid to poor mango-producing countries thereby reducing potential migrant flows and saving public cash. The public health benefits will be lauded and a massive mango subsidy will be advocated. Import duties on mangoes will be eliminated and that will increase economic growth as an entire new industry emerges around mango importation, processing, distribution and retail.

By the end of the 2020s, this industry will add 5% to GDP. It will expand employment. Mango growers, sellers and distributors love it and they know what they are talking about. We will live longer, fuller, richer, happier lives. With this new healthy and wealthy outlook, we will commit ourselves to public good works and civic renewal. We will be the virtuous society. We will be the virile society.

So I had the answer from the beginning. I then set about dragging together evidence to prove that my preference was in fact a wider public good. It wasn’t just my taste. There was a wider ethical, economic, political and scientific case.

This pretty much sums up the approach to the report of 2020 Tax Commission from the Institute of Directors/Taxpayers’ Alliance.

The eighteen thrusting men and one woman who sat on the ‘commission’ like lower taxes and they have scoured the worlds of philosophy, economic research, biology and public policy research to make the case. And the conclusion that the reader comes away with? They are nineteen people who would prefer lower taxes.

Essentially, what the TPA/IoD have produced is a 400+ page brain dump. Surely the point of a commission is to weigh up a broad range of evidence and then come to some sort of balanced conclusion? If they had done that then they may have spotted that the overall level of tax doesn’t seem to be the key determinant in economic growth. Bad or punitive taxes can certainly be harmful but that’s an argument for looking at the overall impact of a tax system rather than pretending that there would be some sort of economic or moral dividend from a reduction of overall levels of tax to 33% (good-bye NHS) and a flat tax.

If you want to see how a real commission operates, then take a look at the IFS’s Mirrlees Review which on the basis of balanced evidence proposed a more neutral and progressive tax system. You don’t have to agree with it all or think it all can be delivered politically to see the very different process they undertook.

While the make-up of the review stuck to the male and pale theme of tax policy, it did least pursue its subject in a genuinely investigative and analytical sense. It is an authoritative report as a result.

In the same week as the 2020 Tax Commission report, along came the Beecroft report on employment law. Many different versions of this report have appeared in various places. This report is at the opposite end of the spectrum to the 2020 Tax Commission report. It didn’t really bother with evidence at all. It made some fleeting assertions then just got down to business straight away – deregulation before breakfast, lunch and dinner. What was most revealing in the approach was a paragraph in the October 2011 version of the report:

Many regulations, conceived in an era of full employment, are designed to make employment more attractive to potential employees. That was addressing yesterday’s problem. In today’s era of a lack of jobs those regulations simply exacerbate the national problem of high unemployment.”

Presumably, women wouldn’t seek work just in case they got pregnant without maternity leave? And people stay well clear of the employment market unless there is not any chance of unfair dismissal? Is it the case that many people only seek work if they know their employer will make a contribution to their pension fund?

It is not difficult to come to a convincing explanation of why Adrian Beecroft has such a loose grip on economic reality. The real mystery, however, is how he failed to make the final cut for the 2020 Tax Commission.

His short report skips from assertion with evidence to ‘solution’ without consideration of real impact. Essentially, he argues that ditching some poor-performing workers with better ones is good for efficiency and growth. That is clearly the case. The only mystery is why any firm would have any difficulty doing that. Sure, there is a process to be followed. Sometimes the process resolves the issue without the need to fire someone. But there is absolutely nothing stopping a firm dismissing an under-performing worker and hiring someone else.

These laws may be a hassle in some ways but they hardly constitute heavy and over-bearing regulation. And just as in the case of overall tax levels, there is little correlation between levels of regulation and employment performance. Germany has moderate levels of regulation and we have low levels but their recent unemployment record is better. You can have ridiculously rigid systems of regulation such as in France or Spain and that is damaging. There is no evidence whatsoever that moving from low levels of regulation to even lower will have any real impact on employment. In fact, it could well harm it as fire becomes a bit more common than hire.

Whether it’s mangoes, lower tax or deregulation the same thing is going on here. There is a preference – an ideological preference as it happens – then the facts are forced into the corset of that preference.

It’s easily countered but that could be missing the point. Maybe we should all take a step back. Surely the most important point to be taken from the Beecroft report and the 2020 Tax Commission is that the right has completely run out of intellectual energy.

Maybe the centre-left has grown so used to the onslaught that we’ve experienced over the last few decades that we’ve lost the wood for the trees. If more ideological deregulation and tax reduction is all that the right has left then we’re in a different place.

We can now just let the right drift off into the ideological wilderness. And get on with working how what, in practical terms, we can do to build a better society and economy. Beecroft and the TPA have done us a favour. We should be grateful.

Oh, and forget about the mango thing – it’s madness.

Anthony Painter is an author and a critic. His new book ‘Left without a future? Social justice after the crash’ is published by Arcadia books in July.


Tags: , , ,


16 Responses to “The Sunday review: The 2020 Tax Commission and the Beecroft report”

  1. swatantra says:

    Makes sense. ‘Tax’ is just another way of sifting the wheat from the chaff.

  2. The only flaw in your argument is that we have a government which is *listening* to these extreme (-ly stupid) opinions, and we wake up tomorrow to find that they have slid them into force without anybody noticing or having time to protest.
    I have a suspicion that the government are the *real* iconoclasts and that they allow these very extreme suggestions to surface in order to create a smokescreen to distract us from its very real and very damaging assault on our rights.

  3. Gtechs says:

    With reference to the 2020 Tax Commission report. Any tax-paying pensioner on less than 35K will be poorer. Pensioners do not pay NI and so can’t benefit if NI contributions are scrapped.
    If you check the TC report summary there’s not a single reference to pensioners.

  4. Ralph Baldwin says:

    The right has not run out of intellectual energy in the slightest lol, from what i have been reading, listening and watching Peter. The left is dead as a dodo, just watch France lol.

    You all point fingers at that which you ll hate but in the end you are merely pointing at mirrors and that which you hate the most: yourselves.

  5. Mike Homfray says:

    The other problem with the report is that it doesn’t even try to be evidence based. You would think that they would have at least tried to find some sort of reasoned backing from a right wing perspective, but it doesn’t come down to much more than ‘this is what I think’

  6. aje says:

    As a member of the commission I was looking forward to reading some of the criticisms from the left – I was hoping the report would initiate a constructive dialogue about the tax system. For example, I was really pleased to see Mary Dejevsky’s report in the Indy:

    http://www.independent.co.uk/opinion/commentators/mary-dejevsky/mary-dejevsky-why-the-political-left-should-adopt-the-flat-tax-7786012.html

    As far as I can tell, this article is just a smear, with no attempt to engage in the substance of the proposal. The mango analogy is ridiculous precisely because we are *not* attempting to impose our subjective preferences on other people. Indeed your only attempt to discuss the ideas is to link to Nick Pearce’s *blogpost* as if it’s some sort of conclusive proof!

    For what it’s worth, the TPA have responded to that, which you’d do well to acknowledge:

    http://www.taxpayersalliance.com/economics/2012/05/spending-deliver-stronger-economic-growth.html

    That way at least your readers may be able to talk about the substance, rather than just assume it’s some sort of conspiracy. It’s a real shame that we can’t have a mature conversation about tax.

  7. I think you’ve misunderstood my entire argument. My point is that to start to get too much into the detail loses the wood for the trees. If you wanted a substantive debate about tax then I’d have gone for a more, balanced weighty report instead of what the Commission actually produced.

    As for the piece in the Independent about what the left should do, I didn’t find ‘the left should back the report because working and middle class people pay tax and it’s 400 pages long’ a convincing argument. It seemed to mirror the lop-sided approach of the report in that they also benefit from public services and public investment. What sort of business only looks at one side of the balance sheet? It’s the same in public policy.

    The notion that the above review is a ‘smear’ just shows how far out the TPA/IoD have found themselves.

  8. Anon E Mouse says:

    John D Clare

    You say: “I have a suspicion that the government are the *real* iconoclasts and that they allow these very extreme suggestions to surface in order to create a smokescreen to distract us from its very real and very damaging assault on our rights.”

    Damaging to our rights!

    After 90 days detention, CCTV and proposed ID Cards have you noticed Labour comprehensively lost the last election?

  9. aje says:

    My point is that to start to get too much into the detail loses the wood for the trees. If you wanted a substantive debate about tax then I’d have gone for a more, balanced weighty report instead of what the Commission actually produced.

    So you don’t want to engage in a substantive debate because you don’t feel that the report was strong enough to deserve one. But I wonder how you can reach that judgment without having a view on what you found unbalanced, or too light?

    You’re either pre judging the evidence to support your own priors (the exact thing you’re accusing us of doing) or you simply don’t think it’s worth trying to have a rational discussion.

    But the reason I was reading your article is because I was hoping for a constructive critique, and to learn something. It’s the easiest thing in the world to dismiss a 400+ page report on the grounds that it’s biased, but chucking insults about won’t get us anywhere. There’s plenty of aspects of the report that the left can engage with.

    It’s a shame you choose not to.

  10. Clint Spencer says:

    Homfray you hypocrite this is a blairite blog. For years you’ve been telling anyone without your narrow minded view to get off Labourlist. Now I’m telling you i don’t want your sort her, didn’t you read Ralph’s excellent comment “about what you haters are all about?

    “You all point fingers at that which you ll hate but in the end you are merely pointing at mirrors and that which you hate the most: yourselves.”

  11. @aje It’s a review. It fits that purpose. I was selective but I only had 1000 or so words to play with. You had 50,000 and came nowhere near achieving balance. How on earth can you recommend a flat tax without considering for a moment what £130bn you would cut from public services? It’s a nonsense.

    If you want to engage in debate then great. State the cuts you’d make because without that it’s meaningless. As the review says, the Mirrlees report is a serious analytical report on tax- good and bad ways of taxing. Your report wasn’t. It was disconnected from real public policy decisions and do what is there to debate other than what it says about the state of ideology on the right – the subject of the review.

  12. aje says:

    How on earth can you recommend a flat tax without considering for a moment what £130bn you would cut from public services?

    Because it was a *tax* commission. I’m amazed that your main objection to a 40,000 word report on tax is that it omits a discussion on spending…

    If you come across anyone that wants to actually sink their teeth into the arguments and analysis provided please do pass on my email address. I’m genuinely interested in hearing critiques.

  13. Clint Spencer says:

    Anthony there is a school of thought that says a flat lower rate would yield more. The point is that labour needs to change from a party of we’re labour so tax the rich bstds to how do we get what we need for the services we want to provide.

  14. By the way @aje, I checked out the TPA blog you linked to. It seems incredible that in all the man hours you all put into the 2020 Tax Commission that no-one could find a huge literature that challenges Robert J. Barro! It doesn’t say much for the process of the Commission (or its efficiency!) – which is the point about its tendentious nature.

    For what it’s worth, the sensible course seems to be that very high taxes do seem to impede growth (over say 50 percent) as does very low public spending….all things being equal. The evidence in between the extremes is very sensitive to the assumptions you make. The sensible approach is to decide as a democratic society what level of tax is reasonable (the UK seems comfortable with about 40 percent), ensure you tax in a way that minimises negative impact on growth and spend in a way that, in the context of your social priorities, maximises the positive impact on growth. There is probably no dividend to be had by moving from a state comprising 40 percent to 33 percent of GDP. There may actually be some harm depending on what you cut to achieve that reduction. That’s about all you can sensibly say. When economics becomes categorical certainty as your report was then a flashing red light should be switched on. Hence the review – bad process and analysis makes bad public policy.

  15. In answer to you final point @aje, you want a debate but duck the simplest of questions. Hardly bodes well for the public discussion does it?

    I’ve enjoyed this non-debate. If you really think you can talk about slashing tax without discussing the actual impact of that on growth, public services, welfare, defence, etc then it’s really difficult to know where to begin. You want lower taxes. You want a flat tax. Fair enough – those are personal preferences like my enjoyment of mango. But let’s not pretend that it’s somehow some economic miracle without at least making some attempt to look at the issue in the round – either by looking at a balanced literature on the impact of tax and by looking at what would happen to public spending. I hope you take some time to compare what you did with Mirrlees or the Turner Commission or the Low Pay Commission etc.

  16. aje says:

    no-one could find a huge literature that challenges Robert J. Barro
    Again, rather than just make assertions about the failings of the report, why not provide evidence. What is the literature you’re referring to?

    Maybe it’s not mentioned in the report because it contradicts our priors so we ignored it. Maybe it’s because we’re not aware of it. Maybe it’s because it’s not peer reviewed. I can’t say, because you’re not specifying what it is that you’re claiming we’ve missed.

    The sensible approach is to decide as a democratic society what level of tax is reasonable (the UK seems comfortable with about 40 percent), ensure you tax in a way that minimises negative impact on growth and spend in a way that, in the context of your social priorities, maximises the positive impact on growth. There is probably no dividend to be had by moving from a state comprising 40 percent to 33 percent of GDP

    That sounds quite reasonable, but the whole point of the report is to discuss ways to improve the tax system such that it minimises negative impact on growth. We would have saved ourselves a lot of time and effort if we’d just recommended that the government “ensure you tax in a way that minimises negative impact on growth”. Alas, there’s a slight difference between having the intention to do this and actually achieving it. The point of the report is to investigate the ways in which the tax system in its present form harms growth. With evidence. Plenty of the examples provided are perfectly compatible with a left of centre perspective. Unless your aim is to make tax accountants and lawyers wealthy there is plenty of areas where we can agree on in terms of reducing complexity and making taxes more transparent.

    And we actually address the issue of the optimal size of the state rather than just make the phenomenally sweeping claim that “there is probably no dividend”.

    You also seem to be completely ignoring the fact that we used public opinion surveys that ask people what levels of tax they thought were appropriate. We provided evidence that people believe they are paying too much tax. This can be challenged, but you can’t just ignore it.

    you want a debate but duck the simplest of questions.

    Sorry – what question are you accusing me of ducking?

    You want lower taxes. You want a flat tax. Fair enough – those are personal preferences like my enjoyment of mango.

    No – this is the trivialisation and misrepresentation that I was originally challenging. Your preference for mango is not a collective action problem. And when you try to fabricate it as a public good you’re just being silly. Taxation is collective action and your preferences affect other people. Plenty of evidence shows that tax systems can become inefficient, and that there can be gains from improvements. Unless you have a blind faith in democracy and believe that whatever results it produces is efficient, you must accept this.

    Again, your entire “critique” is simply asserting that the report wasn’t balanced. I’m not saying that it was “balanced”. I’m not saying that the people writing it don’t have intellectual priors and biases. But that doesn’t mean there’s nothing you can learn from it, or that there’s nothing that I/we can learn from proper criticisms. You’re completely evading that debate though.

Leave a Reply