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Taxes, taxes, everywhere

Cartoon from the Regency period lampooning government taxes. Image public domain.

Now in paperback, an account of taxation and government spending over the past three centuries casts an interesting light on the nation’s development…

The dreadful monster and its poor relations: taxing, spending and the United Kingdom 1707-2021, Julian Hoppit, paperback, 352 pages, ISBN 978-0141992266, Penguin, 2022, £12.99. Kindle and eBook editions available.

Taxes are in the news again, but the role they play in our economy and society is not always well understood. This carefully researched and fascinating account of taxation and spending over the past 300 years is now out in paperback. It also offers insight about the nature of Britain and how our nation has developed.

The author, Julian Hoppit, is Professor of British History at University College London. His narrative traces the course of public finances, starting with the 1707 Act of Union. Scotland became joined with England and Wales, having shared a king but not a parliament for most of the previous century.

Ireland was subordinate, but later incorporated into the union from 1800, until partition and independence for a part of that island in 1922. And more recently Hoppit covers the partial devolution of taxation and spending to Scotland and Wales.

The book takes its title from a piece of Scottish verse published soon after the 1707 Act of Union which called the newly unified state the “dreadfull Monster”, with London gorging itself on new taxes. This divisive and mythical account lives on in nationalist circles.

Darien disaster

The background to the union was the disastrous Darien scheme – an attempt by Scotland in 1698 to set up a Central American colony. It collapsed after two years, leaving their finances in ruin. Opposition to a centralised state after the union was less about tax and more about resentment at English capitalism being able to take advantage of a weak, and still partly feudal, economy.

‘Hoppit’s analysis damns the financial case for Scottish separation from the rest of Britain…’

The newly United Kingdom set about taxing all of its citizens in a centralised way. The burden didn’t just fall on Scotland. When Benjamin Franklin famously wrote in 1789 that “…in this world nothing can be said to be certain, except death and taxes”, he was echoing ideas expressed earlier that century by English writers such as Daniel Defoe.

The opposing myth is that London is the source of the nation’s wealth and all the other parts of Britain are the “Poor Relations”, a drain on the public purse; “subsidy junkies” in the ugly phrase some Thatcherite ministers used.

Part of Britain’s official self-image that it is a well-run and united country, in contrast to our neighbours, with their revolutions and dictatorships. In fact, our history is far more turbulent than that complacent vision. There have often been tensions between different parts of the country about how it should be run, and most significantly, about who should pay for what.

Wealth creation

While he does not address the question of the ultimate creation of wealth, Professor Hoppit’s analysis shows that the pattern of taxation and spending is more complicated than the two simple myths identified in the book’s title.

He notes that in the late 18th century, “Despite the rapid rises in the tax take in Scotland from 1780, there was no revolt or rising there. America had been lost in part because of London’s tax policies towards it. The French Revolution arose from the bankruptcy of the French state. In Scotland, there was nothing of the kind. Ireland, though, was to be a very different story.”

In the 1840s too, Scotland was very different from Ireland: “On the eve of the Famine, Scotland was clearly flourishing within a political economy which, since the 1780s, it had helped to frame.” Ireland was never integrated into the rest of Britain. It would be a mistake to think that the cause of Irish independence was just about excessive taxation, even though that was a factor. And ever since partition, the UK government has subsidised spending in the north of Ireland.

Coming to more recent debates, Hoppit observes that some Scottish separatists have claimed that “the relative prosperity of south-east England was due to the presence of central government there. Welsh nationalists such as Gwynfor Evans had argued much the same before.”

Cause and effect

This confusion of cause and effect, as this book shows, would have been familiar three centuries ago. As usual, it does not explain why the reduction of London’s vitality would increase that of other parts of the Union. This complaint also falsely frames problems in “national” terms, ignoring the many areas of England that severely lag behind London (which itself has many poor areas).

Hoppit’s analysis damns the financial case for Scottish separation from the rest of Britain, “One thing that became clear in these debates was that, in terms of the balance of revenue and expenditure, Scotland did relatively well out of the UK as a fiscal compact. Indeed, it did better than some English regions, undermining a simple narrative of two nations facing one another. …If it was clear that the price of independence was a lower standard of living than that achieved in the rump of the UK, this would be honest and thoughtful, but it would also probably mean the SNP losing any future referendum.”

In conclusion, he writes, “Current invocations of addressing regional economic imbalances by levelling up will be inadequate without significant redistribution. As this supposes, if the Union is to be more content with itself, the benefits of the sharing of risk and resources across its extent, organized centrally, have to be celebrated, with the language of “subsidy” consigned to the rubbish bin of history and less presumption that what seems right for England must be right for the rest of the UK.”