This first article is by Rt Hon Kelly who served as a treasury minister from 2001 to 2004 and then served in three cabinet positions. She has therefore been responsible for taxing, as well as spending taxpayers’ money, at the very highest levels. Ruth Kelly writes…
I am not a theologian but offer some thoughts on the subject of taxation – and more broadly the role of the state – given my experience in politics, and my understanding some of the pressures on the state in modern times.
The piece which I contributed to the document was written some time ago during the Covid shutdowns, but I think it has wider applicability. If anything, some of the pressures on the state and vulnerabilities of society which were exposed starkly at that time have worsened since then.
It is worth stating that I decided to enter politics a long time ago, because I believed in the power of government and the state to help provide the foundations of a decent life for people – housing, food, warmth etc – and that it could also provide a framework which could be used to encourage people to do well by themselves, their families and their neighbourhoods.
I was particularly concerned with the plight of the unemployed – and highly affected by the spike in unemployment in the early 1990s – and, in particular, the very visible experience of the homeless on the streets. I thought the state should do something about it.
The context then was very different from the one we have now, however. The UK tax burden was falling steeply to just over 27 per cent of GGP in 1993, well below the EU average. The country’s debt was eminently manageable. The debt to GDP ratio was around 24 per cent – low by international standards.
But that has all changed now for the worse. The combination of rising spending on welfare, the financial crisis and Covid put extraordinary strain on the Exchequer, meaning that government debt almost touches 100 per cent of GDP and the tax burden is the highest it has been in the country’s history.
The bond markets are jittery, wondering whether we will be able to continue to service our debts, and clamouring for spending cuts. This is reflected in a significant premium in the cost of borrowing – making the problem even more acute.
Those facts alone should give us pause. Arguably we are at an inflection point, necessitating a sharp choice: should we continue to raise taxes or start to cut spending? Many would argue that raising taxes further would put an unbearable burden on economic growth, but that cutting spending would cause untold suffering, particularly for the poorest members of society.
Of course, both those concerns have validity. But the argument in my contribution to Render unto Caesar is a little different. Has the government spending that we see and have seen in recent decades delivered what we all need to prosper? I argue that it is not just the size of tax and spend by the government that matters, but it also how it is spent. And for a long time, the political system has forgotten that its true task is not to provide resources to people but to nurture the conditions for individuals and families to look after themselves.
High levels of spending and taxation have not produced a more stable state, a happier society or greater levels of personal fulfilment. Arguably the reverse is happening.
Covid exposed a weakened and vulnerable civil society. Within a year, the Office for National Statistics found a substantial increase in loneliness. It is now even worse. 27 per cent of adults are lonely some or all of the time – and loneliness is even more acute among young people.
Mental health, particularly among young people, is truly awful, with 20 per cent of girls between 16-24 have an identified eating disorder, far more when other diagnosed health conditions are included. It is getting worse.
Swathes of people dropped out of the workforce during Covid, never to return, and among young people, inactivity has risen by 80 per cent.
There are some obvious causes of this fragility. We are facing an era – which started in the 1960s – in which individual desires are increasingly trumping the need for order, self-restraint and the common good. There is a huge emphasis on individual autonomy, seen most strikingly in the recent debates on assisted suicide. Divorce rates have soared, leaving more and more children without the basis of a stable two-parent household throughout their childhood.
And not only is this making society poorer, this breakdown in society is increasing the cost of dealing with social problems. If there are fewer strong, extended families, who is going to look after people in their old age, as just one example?
So, what do I think the state should be doing? And what do I think Catholic social teaching can tell us.
To be as simple as possible – I believe that Catholic social teaching demands the rebuilding of community and civil society. The market and the state should not be the only two institutions promoting prosperity and human flourishing. Indeed, the principle of subsidiarity demands that we always try to tackle issues at the lowest possible level, within the family and the community, using the state as a last resort.
As the late Chief Rabbi, Jonathan Sacks, said so powerfully: “The state cannot provide strong families or supportive communities, It cannot provide children with stable and responsible parents. It cannot generate the work ethic, self-control and resilience that are vital if individuals are to escape the vicious circle of poverty and unemployment and lead lives of happiness and hope. It is not surprising that those who are suffering from this lack of resilience are increasingly discontented with those who govern them, asking from politics and politicians a satisfaction which they could never hope to provide”
This Catholic social teaching perspective does not deny the proper role of the state or the market. However, I would argue that the signs of the times are clear – we need to put the state at the service of families and communities and not try to supplant them. The state should be helping other institutions in society rather than taking over their role. It may help other institutions through finance, co-operation or simply by providing a fiscal, legal and regulatory framework that enables all institutions in society to thrive.
Every single policy, tax and spending measure, needs to be tested to see whether it supports and nourishes families, charities, faith groups and local communities. The tax system in particular needs to favour family formation, support care in the home, and incentivise charitable giving.
I’m not sure there are any short-term fixes to the problems we face. But I believe that would be a start.
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Image: Feast of the Annunciation – Paolo de Matteis, Public domain, via Wikimedia Commons
