Abstract
The publication in 1978 of a report on The Structure and Reform of Direct Taxation by a committee headed by the economist James Meade marked the first fundamental study of the UK tax system commissioned by the Institute for Fiscal Studies. Many of its main recommendations centred around a shift away from taxing income and towards taxing expenditure. Tax incentives to save and reductions in marginal rates of income tax were designed to improve incentives to earn and to invest income. Such a shift characterised the UK tax system from 1979, albeit without acknowledging the work of the Meade Committee.
Acknowledgement
I would like to thank Martin Daunton, James Foreman-Peck, Les Hannah, John Kay, Lord Mervyn King, Peter Scott, Douglas Todd and participants at the conference in Reading in March 2017 for their comments on an earlier version of this paper. All responsibility for errors of fact and understanding remain mine.
Notes
1. Hannah and Kay, Concentration in Modern Industry; Hannah, Rise of the Corporate Economy; Coase, “Nature of the Firm.”
2. Hannah, Electricity Before Nationalisation.
3. Hannah, Inventing Retirement.
4. Hannah, Entrepreneurs.
5. Ibid., p. 17.
6. Meade Papers (hereafter Meade) 6/2 (1977a).
7. The National Archives (hereafter TNA) T364/149 (1977b), paras. 23, 24, 29, 32.
8. The Thatcher papers (hereafter THCR) 2/6/1/36; THCR 2/6/1/27.
9. TNA T366/4, para. 2; TNA T366/205 (1976a).
10. THCR 2/6/1/35.
11. TNA T366/383.
12. TNA T171/1450, paras. 5, 6, 7a, 9.
13. Mirrlees, “Economic Uses.”
14. Mirrlees, “An Exploration,” p. 208; Diamond and Mirrlees, “Optimal Taxation I”; Diamond and Mirrlees, “Optimal Taxation II”; Atkinson, “How Progressive.”
15. Atkinson, “Bringing Income Distribution”; Fair, “Optimal Distribution”; Feldstein, “Distributional Equity”; Feldstein, “Optimal Progressivity”; Mirrlees, “An Exploration”; Rawls, “Some Reasons”; TNA T171/1442.
16. TNA T378/88, paras. 6, 12, 14, 16, 19.
17. Meade 6/11.
18. Kaldor, An Expenditure Tax, p. 12.
19. Kaldor, An Expenditure Tax, p. 7.
20. IFS, Structure and Reform, pp. 317–18.
21. TNA T364/149 (1977a), para. 1.
22. Meade 10/17 (1980).
23. Meade 10/17 (1978), paras. 7, A3, D3–4; Kaldor, Expenditure Tax; Vickrey, “Expenditure”; Musgrave, Theory of Public Finance; Shoup, Public Finance; Prest, “A Tax on Expenditure?”; Prest, “The Expenditure Tax”; Prest, Public Finance.
24. TNA T364/149 (1977b), para. 21.
25. Meade 6/1.
26. TNA T364/149 (1977b), paras. 23, 24, 29, 32.
27. TNA T364/149 (1978a).
28. TNA T364/149 (1977a), para. 5.
29. TNA T366/205 (1977b), para. 6.
30. TNA T364/149 (1978a), para. 11.
31. TNA T364/149 (1978b).
32. TNA T364/149 (1977a), para. 7.
33. Meade 6/2 (1977c).
34. Meade 6/2 (1977a).
35. Meade 6/2 (1977b).
36. Howe, “Reform”; Howe et al., Right Approach.
37. THCR 2/6/1/36; THCR 2/6/1/35.
38. Adams, Browne, and Heady, “Taxation”; Banks and Diamond, “The Base.”
39. Kay, “Meade Report,” p. 47.
40. In moving in 1988 to the 40% and 25% income tax rates, the Treasury had been influenced by a paper written by Mervyn King for the Financial Markets Group at the LSE in late 1987. Personal communication from Lord King; King, “Prospects.”
41. Giles and Johnson, “Tax Reform.”
42. Cohen, “Incentives.”
43. THCR 2/6/1/35.
44. Brown and Sandford, Taxes and Incentives.
45. Hayek, Constitution of Liberty, p. 81.
46. Rawls, Theory of Justice, pp 101–2.
47. Hayek, Law, p. 100.
48. IFS, Tax By Design, p. 5.
49. Hills, Inequality, p. 31.
50. Florio, Great Divestiture, Table 8.3, p. 279.
51. Foreman-Peck, “Appraisal of Sales,” p. 80.
52. TNA T364/102 (1977), p. 4, para. 5i.
53. Solow, “James Meade.”
54. Kymlicka, “Left-Liberalism,” p. 13; Tawney, Equality, p. 113.
55. IFS, Structure and Reform, Preface.
56. Meade, Efficiency.
57. Phelps Brown, Egalitarianism, p. 343.
58. Central Statistical Office, National Income, Table 7:1. Income tax receipts include tax credits.
59. IFS, Fiscal Facts webpage. https://www.ifs.org.uk/tools_and_resources/fiscal_facts/
60. Hannah, Inventing Retirement.
61. Atkinson and Brandolini, “On Data.”
62. Hills, Inequality, p. 30.
63. Johnson, “Assessment,” p. 8.
64. Hills, Inequality, p. 32.
65. IFS, Tax By Design, p. 360.
66. Adams, Browne, and Heady, “Taxation,” p. 22.
67. IFS, Tax By Design, p. 358.
68. Daunton, Just Taxes, p. 290; Kay and King, British Tax, p. 93; Flemming and Little, Why We Need a Wealth Tax.
69. Atkinson, Inequality, ch. 7.
70. Piketty, Capital, p. 1; Chick, “A Few Thoughts.”