A policy announcement delivered three weeks ago which barely changed the overall state of public finances is still creating damning front pages for ministers
For the government, last month's budget is the gift that keeps on taking. First there was the outrage over the scrapping of the top rate of tax; then the opprobrium over the smash and grab on pensioner allowances; pastygate (or whatever it was); and now the row over removing tax breaks for charitable donations. A policy announcement delivered three weeks ago which barely changed the overall state of public finances is still creating damning front pages for ministers and – it is almost certain – will force the government into a few inelegant U-turns. Quite a result.
But what is undeniably a fiasco for David Cameron and George Osborne should also serve as encouragement for others. At last, a serious debate is starting about how much the super-rich should pay in tax, and a consensus among all the main parties that mischievous tax avoidance (as opposed to tax planning) by the rich is a bad thing. This is a moment ripe with possibility, and it is up to all those who want a more effective tax system and a fairer society to keep up the momentum. Yes, the chancellor sounds ridiculous in his "shock" that millionaires might be arranging their affairs expressly to avoid tax – but he also raises the question of what the Treasury is going to do about it. And that's a question campaigners and voters alike may now ask him – over and over, until they see results.
While recognising that the debate has shifted in the right direction, we should also face up to the reality that it has a long way to go. Certainly, the current squall over tax breaks for big-money charitable donations on the one hand and politicians publishing their own tax records on the other will not get us very far. For one thing, the chancellor is right to limit the tax relief that wealthy people receive for supporting good causes. This is effectively money that pensioners and the low-paid, along with other taxpayers, are handing to the rich to indulge their philanthropic activities. Surely there must be fairer ways to encourage charitable giving. On this one subject, the cardinal sin that the chancellor has committed is a political one: he has taken on a couple of clearly defined and powerful groups (the big charities and the very wealthy), and made them worse off. Any student of political economy could have told him that the result would be grief.
Second, the sudden craze for politicians to confess how much they pay to HM Revenue is hardly the most elevated destination for the debate over tax justice to settle on. Ed Miliband scored a direct hit on the day of the budget by asking the cabinet how many of them had been made better off. Likewise, Ken Livingstone's bid for London mayor was damaged when he was forced to disclose how he had arranged his tax affairs. But to enshrine this as a principle forcing frontbenchers or MPs to show their financial affairs is seriously misguided. For a start, what exactly would a politician be required to publish: his or her own income, or that of the spouse too and their children? Why not go the whole hog and demand payslips from their parents and Uncle Tom Cobley? The longer one dallies on this terrain, the marshier it gets. And inevitably, the end result would be to put off droves of talent from seeking elected office. Far more logical would be to require every citizen to make transparent their tax affairs – the electoral equivalent of launching a gigantic lead balloon.
Better would be to concentrate on two things. First, a good general anti-tax-avoidance principle. Not the weak tea served by Graham Aaronson in his Treasury study published last November – rightly slammed this month by the trade union for senior civil servants as "suggesting tough action while actually facilitating avoidance". As the FDA suggests, the anti-avoidance rule must be made much broader. Second, the lengths to which big companies go to avoid paying tax needs to be front and centre. This paper's report last week on how Amazon generates sales of over £3bn but pays no corporation tax here shows what ministers and campaigners alike are up against.