First off, as I’ve said privately to David, I think this whole Two Views thing is fantastic – I hope others agree.
Second, a few things that need some correction/clarification. David risked putting words in my mouth, but pulled it off pretty well. I guess, right now, I would say that I’m in favour of a simple, exemption-free GST, and see it as an enduring achievement of the Fourth Labour Government – much like a lot of their enduring achievements, which while it’s unpopular to say, have stood the text of time. But I consciously didn’t want to get into that debate first up, I preferred to let it emerge out of our two pieces. I’m genuinely interested in arguments against GST as the pure system I think it should be – but they need to be clear and coherent arguments. I don’t think what I’ve seen from Labour so far meets that standard.
If you can convince me that GST (especially at 10 or 12.5%) is silly and we should abandon it, then I’m willing to move, at which point the tax should be abandoned, not kept in a half-hearted form. In that sense you’ll find me currently in favour or the tax, but against the exemption; and willing to consider changing my position on the tax, but not the exemption.
And to be clear, I don’t support a flat tax structure – I agree it’s anti-progressive and something Labour should be loudly against. So I’m half-way between the poles David paints. I’d far prefer that we were out there promising to make our income tax structure more progressive at the same time as lowering GST. We could make it really simple, by saying we’d repeal the entire tax-switch! How novel.
I’m also concerned that a lot of the literature, and studies that people point to seem to be based on a general food exemption, rather than just FF&V. For example, one of the biggest problems (if you accept it’s a problem – which I do) about the relative price of ‘bad’ food, is the price of soft-drink relative to other, healthier drinks. This policy does nothing in that direction, and I suspect that the health gains are therefore likely to be over-estimated.
I’m in favour of widening the range of policy mechanisms that David points to when referencing Ed Miliband, James Purnell and our own David Craig. But I have a high standard that needs to be met before I’ll accept that a new mechanism is worthy.
In that sense I’m not willing to accept David’s “anything sensible we can to positively impact the distribution of disposable income in a way that supplements more direct measures should be welcome (especially if it doesn’t attract howls that we’ve “turned people into beneficiaries”). Indeed I think we need to rebut strongly the ‘turning people into beneficiaries frame’ just as much as we need to widen our policy toolkit.
Most of all, what we need is good, open debate. And for the first time in a while I feel that David is doing just that here, and that is brilliant.
UPDATE Tuesday 5 October, 10.23 pm David replies to James:
Thanks for your follow-up comment, James, and for helping to make this ‘Two Views’ work. Thanks too for the two excellent comments we’ve received at the time of writing, from Darel Hall and Ayesha Verrall.
James, I think your statement that “you’ll find me currently in favour or the tax, but against the exemption; and willing to consider changing my position on the tax, but not the exemption” sums up why we’re probably not going to reach agreement on this issue. I see the the breadth of coverage of GST as primarily an administrative consideration — exemptions were a nightmare to administer in the 1980s but are somewhat easier to handle now due to computerisation, so long as they’re well-designed. You seem to see it as something more fundamental than that.
Similarly, while you say you’re “in favour of widening the range of policy mechanisms” used to achieve a more equal disposable income distribution, you add that “I have a high standard that needs to be met before I’ll accept that a new mechanism is worthy.” I’d venture to submit that in practice that means you’ll tend to default back to the ‘comfort zone’ of ‘Redistributive Market Liberals’, i.e. tax credits and targeted tax cuts.
As I’ve said, I support some further use of those mechanisms but I think we need to recognise that they will only take us so far, and the more use we make of them the more we risk ‘push-back’. Yes, we need to challenge the Right’s discourse about “turning people into beneficiaries” (were the wealthy people who got unneeded $200 a week ‘hand-outs’ on 1 October also beneficaries?). But we may also need to accept that, as David Craig’s post on this topic suggests, there’s a more fundamental sentiment than a few Crosby-Textor talking points underlying the sense that income that appears to take the form of a market-determined wage has more legimacy than a state-samctioned entitlement.
Now, obviously, the solution to this goes way beyond a 13% drop in the price of fresh fruit and veges. But I think if we’re going to move forward with “widening the range of policy mechanisms”, we’re going to have proceed with an open mind and a level playing-field. If we set much higher thresholds for action in new areas, and don’t ask hard questions about the efficacy of the old familiar mechanisms, then we’re just going to keep repeating what we’ve prevously done. And I’m not sure that’s going to take us that much further.
I guess what I’m calling for is a willingness to experiment a bit. However, your and Darel’s critiques have reminded me that the corollary of that is a commitment to rigorous evaluation, and being open to reconsidering what we’re put in place if it isn’t as effective as we hoped. As Ayesha said, the GST change should have “both scale and impact” (though it ought to be accompanied by other interventions around diet and activity). Let’s test whether it actually does make a difference to people’s shopping and eating habits. If not, perhaps we should be willing to say, “it was worth a try”, and invest the money somewhere else instead.
UPDATE Friday 8 October, 10.30 am James gets the last word:
I guess you are right David, I will default to the comfort zone of redistributive market liberals, but only to a certain extent.
I actually feel caught wanting Labour to be more radical, not less. But if they can’t be as radical as I would hope, then I feel they shouldn’t hedge. If we’re going to complain about the tax system then let’s complain about it! Let’s go for a Capital Gains Tax, let’s commit to higher taxes on the wealthy, let’s properly put a price on Carbon. Let’s get serious.
Most importantly let’s be clear about how government should raise revenue before we start spending it – because I feel that one of the reasons this announcement annoys me is that there’s a false dichotomy being used – “We can’t afford to reverse GST, so this is what we’ll do.” But we haven’t actually answered the first part to my satisfaction, so I can’t see how we should be asked to accept the second part.
In the end though (and here’s where I think this experiment of your’s is a huge success) if the policy is put forward on the terms you lay out – I can grudgingly accept it. I won’t agree with it, but I can find peace. But if it’s not; if this really is just silly populism backed by weak arguments then I’m really struggling to see how we’re going to make a case to be a credible government.