On the eve of an historic vote about the nation’s position within the European Union, this year’s Oundle Lecture was delivered by Edward Troup (Bramston 1972), Executive Chair and First Permanent Secretary of Her Majesty’s Revenue and Customs. In attendance were the entire Lower Sixth Form, Old Oundelians and invited guests.
In his talk titled ‘Tax, War and Democracy’, Mr Troup began by referring to the EU vote as the first occasion where democracy would genuinely affect an enormous change, and admitted that a talk about taxation could not have been scheduled for a worse day, hinting at the issues that would need to be grappled with should there be a vote to leave. His talk focused on how central tax and war are to democracy, and how control of the revenue was essential to the power of government.
He outlined a timeline, highlighting the key historical figures who introduced changes to taxation that led to the modern state: William Pitt who introduced income tax; William Gladstone who was an advocate of free trade; the ‘great reformer’ Lord George whose ‘people’s budget’ introduced progressive taxation; and William Beveridge who wrote the influential report on social justice that led to the creation of the welfare state with its remit to increase taxation to tackle ‘want, ignorance, disease, squalor and idleness’.
While taxation is essential to the power of the state, particularly in times of war, governments cannot assume the right to impose it. Taxation requires engagement with the citizen, and democratic representation is essential. Mr Troup said the public has to be persuaded about the government’s intentions, because losing the public’s confidence can be disastrous, citing the poll tax riots of 1992 as an example.
Mathematicians and economists love graphs, but he emphasized that graphs and theories have to work in the real world. Tax does influence behaviour and tax incentives can work, he insisted, but policy makers must beware of unintended consequences of ‘messy’ policies, referring to the row that heated up over the ‘pasty tax’.
He said that the biggest threat to tax and tax revenue that has been faced over the last 200 years comes from new online companies with global reach that have changed all the rules about terms of employment or trading, such as Uber, Airbnb or eBay. However, he does not see any move to a global flat rate for multi-national corporations; tax is a political issue that requires a democratic mandate.
The hot issue recently has been tax avoidance by large corporations and individuals using offshore tax havens. Mr Troup accepted that there is a problem, and that more data about British citizen accounts is required, but he said that the reality is that the UK is among the most tax compliant nations. He said it is the fault of HMRC that the facts are not communicated more clearly to the public, and he hoped that they could find a way to elevate the public debate.
He concluded with the observation that progress is possible, but major change needs war, crisis or good luck. ‘Tomorrow is another day’, he said, not knowing then how different the day would dawn.