To desire that the world be a better place is a noble aspiration, to campaign for it a righteous occupation. But equally important is to understand how the world actually works if we want to improve it.
That brings us to Owen Jones’ latest column, in which he insists that we ought to be emulating Sweden with what he claims is its top income tax rate of 60 per cent.
Now, it is entirely true that there are things admirable about those Nordic economies. They may not be to everyone’s tastes, but we do have to admit that they work pretty well and their citizens are, broadly speaking, pretty well off. Moreover, they comfortably pass the universe’s great test of a socioeconomic system – people migrate to them, not away.
But why is it that the Nordic model works? The likes of Mr Jones would contend that high tax rates are integral. However that misses the point that underneath those taxes, the Scandinavians are more free market, even more capitalist, than we are or even the US is. Their corporations are indeed more efficient – because they are deliberately structured to not just emphasise but exalt the shareholder interest.
Which brings us back to taxes. Jones makes the following claim to support his argument that the Labour Party should be proposing bold tax hikes: “Labour’s proposed top rate of tax is 50 per cent, more than 10 points lower than Sweden, which is a far more prosperous, fairer nation than our own.”
That is not quite the whole story – the top national income tax rate in that icy social democratic fastness is actually 25 per cent. In Denmark national income tax starts at a mere 3.76 per cent and rises to the appallingly confiscatory level of 15 per cent.
It’s entirely true that the overall income tax in Sweden approaches that 60 per cent mark Owen so desires, but there’s a crucial caveat here. The largest component of that tax is levied at the municipal level. It varies by town and county but averages 32 per cent. It really is the dreaded postcode lottery, a country where the same income pays different levels of tax dependent upon location.
To paraphrase the League of Gentleman, this is local tax for local people. Public services, up to and including the health service, are paid for by locally raised revenues. That means the first thing we’d have to do to make the UK more like the Nordics is abolish the national part of the National Health Service. The national part of the tax system would then pay for things that must be done nationally, the local for what can be done there.
This is more than just snark. What all of these high tax nations have in common is devolution in both revenue collection and spending. This is one of the reasons citizens of these countries tolerate such high rates. They know that a slice of their income will be deployed locally, in buildings and services one can see, influence and monitor. I’ve called this Bjorn’s Beer Effect. If councillor Bjorn raises the money from us and spends it on our behalf, and he’s local enough that we know where he has his beers, then he’ll be more careful about what he does with it and we’ll all benefit.
It turns out the things that make the Nordic countries so successful – free markets, localism and a great deal less centralisation of taxation and spending – are precisely the elements Owen not only fails to mention but actively rejects. When you come to think of it, this is not a great start for someone crusading to deliver a better society. If you don’t understand why certain countries are successful, how can you hope to replicate what they do well?
It is true that I don’t – as you may well have realised – share Owen Jones’s vision of what the good society would be. But if he wants us to be more Nordic, it really does mean we should become entirely the opposite of everything Jones urges — radically free market, capitalist and near entirely fiscally devolved societies. I’d still object to the tax rates but bring on the rest, quite frankly.