To What Extent Is Labour Still a ‘Tax and Spend’ Party?

The levels of taxes and government spending have been a growing issue in modern politics since concern arose over Atlee’s post-war government and their steeply progressive income tax structure. Labour started with high levels of taxes. By 1955 the Conservatives were back in power and redeeming their 1945 election promise to make ‘an early reduction in taxation.’ At the end of the ‘50s, taxation as a proportion of GNP was at a low level. By 1970 it had risen from 28.4% of GNP to 44% (David Gladstone 1999). The late 60s saw the ‘take off’ in social expenditure. The Conservatives increased indirect taxes in the 60s and then Labour broadened their scope e.g. capital gains tax. The Labour government prior to the 1979 Conservative government was accused of overspending and blamed for the overheating of the economy, reinforcing their reputation as a ‘tax and spend’ party. The incoming Conservative government went on to reduce many taxes believing that they discouraged enterprise. With economic stability being so important to a government’s reputation, Labour did not win power again for another 18 years. In order to be trusted by the public with the economy, Labour had to make it clear that there would be no return to ‘boom and bust.’ They knew that a return to pre ’79 tax levels would be politically unacceptable. Consequently, Labour made promises in the ’97 manifesto to reassure the public of their ability to maintain a stable economy. They promised to stick to Conservative spending plans for two years, declared Brown’s Golden Rule and the Sustainable Investment Rule. They also promised not to increase income tax, a tax that had been greatly reduced by the Conservatives. However, have Labour kept to their promises since their landslide victory, has their approach to tax and spending changed or have they reverted to the ‘tax and spend’ ways associated with Old Labour?

Gordon Brown’s Golden Rule stated that the government could only borrow to invest, not to use for...