Tag Archives: public finance

‘Tax is not a four-letter word’: Why this matters for health inequalities, and why health professionals and researchers must take it to heart

Posted on by
Reply

The title of this post is not at all original.  Rather, it is the title of a book co-edited with his son by the thoughtful former head of Canada’s public service, Alex Himelfarb (after his retirement).  In a newspaper column published at the time, Dr. Himelfarb described the book as an effort to correct the ‘dangerously distorted’ discourse surrounding tax policy, as a result of ‘the neo-liberal economic policy that began to dominate American and British politics in the early 1980s, and emerged more slowly and subtly in Canada at around the same time’.  Almost a decade on, the discourse remains distorted throughout much of the world, with increasingly serious consequences for inequality and quite probably for social stability. 

Exhibit A is the dire state of Canada’s and the United Kingdom’s tax-financed health systems.  (Although the National Health Service and Canada’s multiple provincial and territorial health systems are financed from general tax revenues and are mostly free at the point of use, they are otherwise quite different.)  That similarity is arguably why both countries are facing a crisis in access to care, worsened by the effects of Covid-19, that has demonstrably had fatal consequences.   Whilst users quite rightly and understandably want health systems to provide necessary care in a safe and timely fashion, resistance to the taxes necessary to finance not only the direct provision of care but also such strategically critical activities as training doctors and nurses has generated political paralysis. 

The explanation was succinctly stated around the same time the Himelfarbs’ book appeared by Robert Evans, the magnificently acerbic dean of Canadian health economists: ‘[A] well-functioning modern health system requires the transfer, through taxation, of a very significant amount of money from the healthy and wealthy to the care of the unhealthy and unwealthy’.  When we hear arguments that the NHS or Canada’s systems of health finance are ‘unsustainable’, this is code for saying that the richest members of those societies do not want to pay for the care of those presumptively undeserving others.  This problem is especially acute in the UK, where the rich have the option of buying private insurance or paying directly for care – something not available within Canadian borders outside the renegade province of Québec.  By 2017, HM Government was conceding the inadequacy of the NHS for treating the great and the good (see below).

Such problems are compounded by what is perhaps best described as a lack of policy literacy among the health care and public health community, who often remain unfamiliar with such basic concepts as progressive and regressive tax and spending patterns (and in public finance these terms have a technical, not a normative meaning).  Chapter 6 of David Byrne’s recent book Inequality in a Context of Climate Crisis after COVID provides a superb overview, and it – or something like it – ought to be a required part of all university public health and health policy curricula.

On, then, to Exhibit B: the catastrophic inadequacy of actual and proposed responses to the energy price crisis created by Putin’s weaponisation of Russian energy exports.  Like the equitable financing of a health system, responding to the crisis will require a substantial redistribution of resources from Mr. and Mrs. Range Rover and the corporate treasuries that have been swollen by windfall gains to the majority of UK households that will, based on estimates by the University of York’s authoritative Social Policy Research Unit, be pushed into fuel poverty by the start of the New Year.  At this writing, the silence of the public health community has been deafening.  Unfortunately, those who will be least hurt by energy price inflation, or who will actually benefit from it, can probably exercise an effective political veto over the degree of redistribution that will be necessary to avoid a humanitarian catastrophe.  In this case, the problem is compounded by a tongue-tied political class unwilling to state the obvious:  liberal democratic Europe is at war with Russia, and wartime situations demand wartime sacrifices.  But that is a posting for another day.

Plutocrats rule, OK? A Canadian lesson about the realpolitik of ‘building back better’

Posted on by
Reply

Although I have lived in the United Kingdom for eight years, I continue to follow Canadian politics.  As we move towards what we hope will be a post-pandemic world, there are also less personal reasons to consider the Canadian response.  Canada has the most progressive – or at any rate, least reactionary – national government among the G7 countries.  Although its Liberal Party lacks a Parliamentary majority, the slightly more left-leaning New Democrats have indicated that they will not trigger an election in the midst of a pandemic, thus giving the Liberals a temporary functional equivalent of a majority.  More importantly and improbably, in her previous life as an accomplished business journalist finance minister Chrystia Freeland (the counterpart to the UK’s Chancellor of the Exchequer) published an award-winning book called Plutocrats: The Rise of the New Global Super-Rich that described in considerable detail the emergence of the new millennium’s hyper-inequality.  If we leave aside most of the country’s stumble-bum public health response to the  pandemic [i] –  and Canada is hardly alone in that regard – Canada’s first pandemic-era budget, released on 19 April with the uplifting title A Recovery Plan for Jobs, Growth, and Resilience, might therefore provide a useful indicator of just how far the Overton window of political feasibility has shifted in the direction of reducing that hyper-inequality.

Canadian finance minister Chrystia Freeeland

The answer is: not much.  The budget includes numerous, and laudable, incremental increases in federally provided social supports and reiterates, without specifics, an important long-standing commitment to pursue a national subsidised child-care programme of a kind that has long been in place in Québec province.  Like many other aspects of social policy, this is a political minefield in the decentralised Canadian federation because of reflexively and zealously guarded provincial jurisdiction over health care, employment law (most of Canada’s provinces have refused to implement even minimal requirements for statutory sick pay) and social programming.  Except when invoking emergency powers, which it has avoided, the federal government can do little more than write cheques with few strings attached to ensure accountability for their use.  Where the federal government has far more policy space to reduce inequality is in the area of tax policy, where the budget is a virtual vacuum.

The major tax policy change in the budget that is specifically targeted at reducing inequality is a symbolic surtax on luxury cars and boats.  This tax is estimated to bring in C$604 million in revenue (£350 million) over the next five years.  By contrast, the budget takes no steps to raise the marginal income tax rate (the tax on every unit of additional income) paid by top-income taxpayers.  It is also silent on the taxation of wealth, although research from the Canadian Centre for Policy Alternatives shows that Canada’s billionaires increased their wealth by C$78 billion (about £45 billion) in the year since the start of the pandemic.  To put that into perspective, the amount is slightly more than the government of Ontario, Canada’s largest province, plans to spend on health care (C$69.8 billion) in 2021-22.  Likewise, the budget does nothing to address the long-standing preferential treatment of capital gains on asset sales, which are taxed at half the rate paid on wage and salary income – a tax preference that overwhelmingly benefits corporations and the richest individual taxpayers.  According to Canada’s admirable tax expenditure accounts, the finance ministry estimates revenue losses from this provision at C$19.7 billion (£11.4 billion) in 2021 alone.  The complete exemption from tax of capital gains on the sale of principal residences, which in much of Canada have skyrocketed in value over the past year, is estimated to cost the treasury C$7.7 billion (£4.5 billion) in 2020-21 – or twice that amount were the generic tax preference on capital gains to be contemporaneously eliminated.  All these figures are probably underestimates, given recent increases in share and property prices. 

There are now so many property-rich Canadians that trying to tax unearned gains on their principal residences would probably provoke a coup d’état, but that is a post for another day.

If measures like those I’ve mentioned were implemented, tax avoidance strategies would no doubt reduce the revenue gains somewhat, as economists are quick to point out.  But that isn’t the issue; the budgets of governments that choose not to strangle domestic growth and immiserate their populations will be in massive deficit for many years to come.  However, Canada’s current government has not made any of the obvious commitments to reducing inequality in the building back process.  Reducing inequality and its corrosive effects on health, which have been foregrounded by the Covid-19 pandemic, will never be achieved by incremental strategies of trying to level-up.  This is not to minimise the value of those strategies in mitigating the worst consequences of the pandemic … and low- or zero-cost childcare, if it ever happens, could be critical to reducing gender inequalities on multiple dimensions.  But mitigation is not structural change. 

A columnist in Canada’s heavily business-oriented Globe and Mail newspaper (paywalled) cited poll results showing that 79 percent of Canadians support a wealth tax.  That, too, isn’t the issue.  Some of the best comparative political science research, from multiple, mostly high-income democracies, finds ‘remarkably strong and consistent evidence of substantial disparities in responsiveness to the preferences of affluent and poor people. Insofar as policy-makers respond to public preferences, they seem to respond primarily or even entirely to the preferences of affluent people.  Indeed … the influence attributed to poor citizens is not just less than that attributed to affluent citizens, but consistently negative’ (emphasis in original).   

It’s really only the plutocrats whose preferences will count, without far more radical changes in political institutions and resources than seem likely in peacetime.  Plutocrats rule, OK?  Health inequalities researchers must resign ourselves to that, or be far more innovative than we have been so far in coming up with ways to do something about it.   

[i] Sometimes, the vacuity of that response can hardly be believed.  Here is a quotation from Canada’s Deputy Chief Public Health Officer, a highly paid federal bureaucrat, as reported on 22 April in a news story on possible restrictions on travel from India, which curiously has since disappeared from most news organisations’ web sites: “‘Our minister of health, other cabinet ministers and the prime minister are very seized with it. They are having active conversations about the data and so on’, he told a news conference today.   ‘I think there will be a decision or something coming forward shortly’.”  In the ‘decision or something’, Canada then banned direct incoming flights from India for 30 days, but not arrivals transiting from India via a third country. The logic is curious, to say the least.

Austerity, the homicidal present, and the probable Russian future

Posted on by
Reply

On 18 June, I presented a webinar with this deliberately provocative title as the inaugural event in Fuse’s Covid-19 seminar series.  I think the provocation is fully justified by the most recent summaries of the UK’s failed response to the pandemic, notably from The Economist, the Oxford Research Group and Reuters.  (A superb one from The New York Times unfortunately appears to be behind a paywall.) 

You can find an archived recording of the presentation here.  My particular focus, as in an earlier posting to this blog (in which I pointed out that the Adam Smith Institute and the leader of the Labour Party were agreed on the importance of a coherent post-lockdown economic strategy), was on what can be learned from the experience of Russia in the generation since the implosion of the Soviet Union about the possible health and health equity consequences of drastic economic collapse. 

Fuse have kindly collected the questions submitted by audience members, not all of which could be addressed in the available time, and I’ve provided brief answers in italics below, under several topic headings.

(This post was updated on 30 June to add a reference to the excellent Reuters report on the UK’s coronavirus response.)

Economic inequalities and uncertainties

Just an observation- what to do about inequality is known, what we lack is the political will to act.

On the other hand… I think we have a generation who will no longer stand for inequalities and injustice. In the words of the late Whitney- I believe the children are our future…

I am also concerned about this issue being compounded by the uncertainty of Brexit when the economy was already in jeopardy pre-Covid 19

A perfect storm – austerity, Covid and Brexit

Agreed that much of what to do about inequality is known … as a small example, researchers at the University of Warwick recently showed that just requiring everyone earning more than £100,000 a year to pay an alternative minimum income tax rate of 35 percent would raise around £11 billion per year, without changing the ‘headline’ tax rate.  Raising the rate on high-income earners would further increase fiscal capacity, as would such measures as a one-off wealth tax of the kind proposed by Thomas Piketty as a way of paying off Europe’s rising debts after the 2008 financial crisis … and, of course, curbing tax avoidance by transnational corporations.

Agreed as well about the added uncertainties associated with Brexit.  For example, what happens to the economy of the North-East if the Nissan plant in Sunderland cannot remain viable?  The one bright spot may be what could be done, but probably won’t be, in terms of national economic redevelopment once EU rules on state aid no longer apply.

What we need to do is convince those in power that the health of the poor actually has implications for their wealth and wellbeing.

Ah, but does it?  COVID-19 would appear to prove the point, but consider how much easier it has been for Mr. and Mrs. Range Rover with a house, a garden, high-speed broadband and professional occupations to work from home and reduce exposure risk … meanwhile, the poor and marginalised in service sector occupations that require in-person work and presonal contact are obviously unable to work from home, whilst in many cases more vulnerable to the various comorbidities that appear to increase the severity of infection.

A Basic Universal Income … a ‘healthy response’ to economic and social sustainability?   

Maybe, if it is not seen as a substitute for investment in in-kind social provision (e.g. social housing, public transport, public health programming).  If used as a substitute, a Basic Universal Income could function as a subsidy for private landlords and dodgy second-hand car dealers, with recipients acting as the intermediaries.  I believe a better response is a basic living income floor, delivered to those eligible by way of a refundable tax credit. 

Do we have economic evidence to argue the case for tackling inequality? For example if we introduced a Basic Universal Income does this have a cost benefit analysis that could convince the rich that it is a good idea?

Here, the answer is an emphatic yes – as the OECD, for example, pointed out in 2015 in a report called In It Together: Why Less Inequality Benefits All.  Researchers at the International Monetary Fund have made a similar point about the need for inclusive growth.  The political problem, as economist Branko Milanovic has shown, is that ‘the rich’ may have much more to gain from promoting policies that redistribute income upward, of the kind we have seen in the UK post-2010, than from promoting economy-wide growth.  Building coalitions around the idea of inclusive growth will be absolutely essential if the pandemic is not to have the effect of ratcheting up inequality.

How many gold-plated Lear jets can one have?

Can’t speak to private aircraft, which is not a market in which I window-shop, but readers who love the sea and want to get really frustrated may want to check out the 200 largest yachts in the world.

Rebuilding economy and society: ‘Building back better’

The areas hardest hit economically seem to be in the North, Midlands, coastal areas etc.  Do you have any insights on the impact of governance structures on preparation for and response to the pandemic?  Do countries with more genuinely devolved powers respond better?

A very good question; I’m sure PhD dissertations will be written in the years to come on precisely that topic. 

I think we can only depend upon the local communities. Take Grenfell: Government stood back, community rushed in to support.

The third sector have traditionally always stepped in when the statutory sectors have cut back support/resources.  I’m interested to know what it is that enables the third sector to do this and what are the barriers that prevent the government.

I would agree that a communitarian approach is key. Hoping to appeal to the conscience of the rich seems wasted energy. For those of us in the academy could we try to make the case to our HE [higher education] institutions that working with charities, mutual aid groups and the third sector is part of our civic duty? There are groups, such as APLE and ATD Fourth World, pushing and campaigning hard against the worst effects of inequality.

What does the best response to avoid the potential Russian pitfalls more specifically look like at a local level?

Surely we created a North of Tyne Combined Authority and Northern Powerhouse to take control of our assets and our future. 

Again, all important points.  There are at least two different issues here: (a) local control over priorities for building back, which is essential, and (b) local resources for building back, which are hopelessly inadequate thanks in part to the fiscal evisceration of local government under post-2010 austerity. 

Local governments and entities like NTCA simply did not have the revenue streams or revenue-raising capabilities they needed even before the pandemic, as I pointed out in the presentation. 

I am convinced that the most likely approach to succeed at the national level is a national development bank, with a multi-billion pound initial capitalisation, empowered to lend on concessional (nowadays,  zero-interest) terms and offer direct grants to private businesses and, especially, local authorities for green rebuilding projects, under a streamlined planning process.  (Such rebuilding in war-ravaged Europe was, in fact, the original mission of the World Bank.)  Think what such an institution could achieve with the resources that would otherwise have been committed to HS2 and the road infrastructure necessitated by the third Heathrow runway …

At the international level, a remarkable pre-pandemic blueprint for a global New Deal was produced in 2017 by the United Nations Conference on Trade and Development.  Good ideas are not thin on the ground.

Age and ageing

How do we challenge the ‘othering’ of the elderly and those with pre-existing health conditions? There seems to be a tacit agreement that this is an expendable group.

Do you think ageing populations and care homes being in the spotlight during the pandemic will change how our society sees ageing?

Yes please to an ageing and Covid webinar!

Why have we [collectively] allowed the crisis in the care homes to accumulate over the past few decades?

There’s a cultural ‘groupthink’ that only other people grow old and get ill – ageing is ‘nothing to do with us’. How can we influence people to make the connection to the fact that it’s their own future care that’s in jeopardy?

All excellent points, and it is hard to avoid the conclusion that the elderly have been regarded as expendable, whether infected in care homes (and this has been a scandal throughout most of the high-income world) or effectively, in some countries like the UK, placed under house arrest.  In Canada’s two largest provinces, Ontario and Québec, no one familiar with the long-term care sector’s decades of underfunding, patchwork public/private provision, casualisation of personal support workers and under-regulation was surprised when some facilities turned into charnel houses.  Will this change?  I am sceptical, although encouraged by the creative response of organisations like the International Longevity Centre here in the UK. 

Fighting back, building ahead

How can we ensure that the public health community don’t shy away from the inherently political nature of inequality and its impacts?

How can we come together as a PH community – and bring about change in a meaningful impactful way without falling into a purely political debate which is a distraction from the key debate?

Public health is everyone’s business it will take all sectors working together.

Good questions, although I can’t agree that ‘purely political’ debates are necessarily a distraction.  Choices about who gets how much of a society’s resources, and on what terms, are at the core of politics, and public health risks irrelevance by ignoring them. 

Are we hindered because the Public Health community does not have a collective voice? This completely reduces our influence in the system.

I think the fact that we separate health from public health is part of this problem.  All health is public health. It is a sleight of hand to suggest otherwise.

I’m not sure that the public health community lacks a collective voice.  It has, in the UK, both the Faculty of Public Health and the Royal Society for Public Health.  The problem seems to me rather that highly accomplished public health professionals have been deeply divided about such issues as the unequal distribution of health damage and long-term economic risk associated with the lockdown … which has meant that the political executive can cherry-pick the ‘science’ it wants.  COVID-19 is hardly unique in this respect!  But in the course of spending far too much time reading media coverage of the pandemic, I’ve been struck by the extent to which The Telegraph ‘got’ the issue of unequal damage from lockdown, and The Guardian didn’t. 

I have a question following on from above – what do you see as the key points and forms of resistance to this?  Especially given the positions of many governments, not least in the UK.

I’m very concerned that these stark inequalities are fuelling reactionary far right wing populism / nationalism / patriotism – and the current government are happy to let this narrative run. Any ideas of how this can be challenged?

I wish I had better answers; hopefully the important dialogue that Fuse has initiated will contribute to developing them, as will a revival of critical thinking in UK universities.  As a political scientist, I have to observe that one of the undesirable characteristics of Westminster-style parliamentary systems is that a government with a legislative majority is so impermeable that it functions as an elective monarchy, in this case with a term of office that runs until the end of 2024. 

What can universities contribute to the resistance of this future in terms of our teaching?

Education has been commodified and is not about transformation. We need to address who can access education and what is provided when they get there … thinking Pedagogy of the Oppressed.

These are of course critically important questions, about which (in particular) Stefan Collini and Lawrence Busch have written brilliantly.  More recently another Canadian (like myself), retired legal scholar Philip Slayton, had this to say:

‘A curious and well-informed mind is a free mind, and a person with a free mind is a free person; creating this free person is what education, particularly postsecondary education, is meant to do. Universities need to reject a corporate consumer-driven model; a student is not a “client.” Universities must eschew misguided vocationalism, emphasize the development of critical thinking – in particular, the ability to distinguish between a good argument and a bad argument – and recognize that society needs dreamers at least as much as technicians. They need a fee structure that makes postsecondary education available to all without career-distorting long-term debt. And they need to welcome the expression of all views, even extreme ones.’

Public finance and public health

Posted on by
Reply

I have argued for many years that public finance is a public health issue.  Against the odds, this view appears to be gaining credence.  The Disease Control Priorities Project is a massive effort to identify the most ‘cost-effective’ options for improving health, funded by the Bill and Melinda Gates Foundation and organised by the World Bank.  The authors of a summary of its nine volumes of recommendations argued that ‘[i]n all likelihood, the finance ministry is the most important ministry (after health) for improving population health’.  Their argument related mainly to the options for taxing such health-destructive commodities as sugary drinks, while reducing subsidies on fossil fuels.  These are all laudable and important objectives, but we must go further.  Finance ministries are the most important ministries for improving population health – first, because they determine the budgets available to health ministries; second, because their policies determine the capacity of governments to meet health-related economic and social policy objectives (through taxation) and the distribution of the benefits of those policies (through their expenditure priorities).

In the United Kingdom, since 2010 we have witnessed an especially striking illustration of this point.  Tax and benefit policy changes have substantially reduced the incomes of those households near the bottom of the economic distribution, with minimal impact on those near the top.  Food bank use has increased sharply, and this is almost certainly only the tip of the health impact iceberg; the most deprived local authorities, which derive much of their income from central government, have been hit hardest by budget cuts and are closing libraries and preventive services like smoking cessation, even as the National Health Service simultaneously cuts back on stop-smoking prescriptions.  Indeed, the NHS as a whole is in a state of continued crisis because of government’s unwillingness to provide adequate funding from general tax revenues.  Meanwhile, corporate tax policy allows firms like Amazon to pay minimal taxes in the UK, even as their low operating costs – thanks to a perverse structure of business rates (taxes) – contributes to the destruction of high street retail.  This is likely to have at least indirect health consequences, for example as town centre dwellers whose age, abilities or finances mean they cannot hop in the car and drive to a suburban shopping park lose ‘control over destiny’.

Against this background, central government continues to commit tens of billions of pounds to megaprojects like high speed intercity rail lines and foreign-built atomic power stations.  (Since this posting was written, George Monbiot has pointed out in The Guardian that a motorway from Oxford to Cambridge is likely to be added to the craziness.)  If the World Health Organization’s important message of health in all policies had been taken seriously, at the very least we would have independent, peer-reviewed health impact assessments of these expenditures, including alternative uses of the funds committed and of the ‘do nothing’ option.  Based on decades of experience with environmental impact assessments, these are essential.  Such assessments are nowhere to be found; health economists’ ritual incantation that resources are limited so priorities must be set clearly does not apply here.

All this will be familiar even to casual observers of UK politics, and has parallels elsewhere, although the public health community has too often remained silent about them.  At the same time, once-radical perspectives on the revenue side of the fiscal policy equation are moving into the mainstream of policy analysis, if not yet of politics.  In 2013, the former head of Canada’s national public service and his son published a powerful edited volume called Tax is Not a Four-letter Word, and decried Canada’s ‘dangerously distorted tax conversation’ – sadly, to little effect.  In February 2018, The Economist warned that ‘[I]f Britons want good public services’ as an alternative to the current collapse, then ‘they will need to pay more’ and hinted at the need for some form of wealth taxation.  In August, it was more explicit.  A leader noted that ‘Amazon’s British subsidiary paid £1.7m ($2.2m) in tax last year, on profits of £72 m’ – an effective tax rate of less than three percent.  The leader also foregrounded the need to tax windfall gains from rising property values ‘in big, global cities’ – which without an effective inheritance tax regime will magnify economic inequalities across generations –  and to reform corporate tax regimes to address the ability of firms like Amazon to shift their revenues to low-tax jurisdictions.  Further, it noted that ‘[a]s the labour market continues to polarize between high earners and everyone else’, with labour’s share of national income in much of the world in a decades-long decline, ‘income taxes should be low or negative for the lowest earners’.  A briefing in the same issue explores one intriguing option – a land value tax, which would capture windfall gains in prosperous areas – in considerable detail.  (Today, taxes on residential property in England and Scotland are assessed on real or hypothetical value in 1991, with a capped ‘top band’ that corresponds to just a small fraction of today’s seven- and eight-figure prices.)

Unfortunately, The Economist did not extend its analysis to such policy options as comprehensive wealth taxation or higher marginal tax rates and alternative minimum taxes on high-income individuals.  Nevertheless, its critical attention to public finance offers the possibility that ‘distorted tax conversations’ may become less so – offering prospects for reducing health inequalities by way of their essential economic substrate.  In these grim and disturbing times, we must seek faint hope where we can.

This posting appears as well on Policies for Equitable Access to Health.