Tax Analysts Blog

Sorry Margaret, No Tea Parties in London

Posted on Apr 28, 2010

Why is there no equivalent to the Tea Party movement in the United Kingdom? British voters, like their American cousins, are concerned about the sluggish economy and rising unemployment. They're also deeply annoyed at bank bailouts and a self-serving political establishment. But where is the populist lurch to the right? A cursory review of the tax issues featuring in the May 6 election suggests that, if anything, the Tories are moving decidedly to the center. That's just the opposite of what's happening on this side of the Atlantic. Margaret Thatcher, the Iron Lady of U.K. conservatism, can hardly be enjoying this state of affairs.

Labour has been in power since 1997 and the sitting prime minister, Gordon Brown, faces a strong anti-incumbant backlash. Though trailing in the polls, Brown supports a new global bank tax. So does Conservative Party leader David Cameron. Brown supports the new 50% top marginal tax rate. So does Cameron. Brown refuses to lower the standard VAT rate; so does Cameron.

What's the burning tax issue that divides them? A trifling one percentage point increase in national insurance contributions. That's it; one percentage point. Cameron opposes it, while Brown refuses to rule it out as a means of closing the deficit. That's hardly the stuff to inspire greying Thatcherites. Where are the angry masses claiming they are T.E.A. ("Taxed Enough Already")? Seems they don't exist in Britain, or in the rest of Europe for that matter. Why is that?

The explanation has less to do with tax policy and more to do with cultural differences.

Leading conservatives in Europe are forced into a centrist posture, while America's Republicans find it necessary to be perceived as far right as possible. Cameron's advisors have him traveling across Britain trying to convince voters that, if elected, he won't dismantle the country's social welfare state. Back in America, once moderate Republicans like former Massachusetts Governor Mitt Romney are obliged to distance themselves from the slightest hint of moderation. The mere act of co-sponsoring legislation with a Democrat could be the kiss of death come November's mid-term elections.

And despite all his political charm, Cameron's campaign has a big problem. The perceived winner of the recent televised debates was third-party candidate Nick Clegg of the Liberal Democrats. Clegg has surged ahead of Brown and is running neck-and-neck with Cameron. The Lib-Dems, mind you, haven't held power in Westminster since 1922. They've been irrelevant for most of the last century.

What is Clegg's take on U.K. taxes? He is surprisingly candid about the need to raise the overall tax burden to pay for public spending and reduce the deficit. Such admissions would doom any U.S. political candidate. Clegg's platform includes a new "mansion' tax on large private residences and increased taxes on capital gains to equalize their treatment with ordinary income. He would also remove many low-income workers from the reach of the income tax by lifting the exemption threshold.

David Cameron may yet win next week's election, but he's no Margaret Thatcher. And that's because there's little appetite these days for her brand of staunch conservatism. Further proof that all politics is local.

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