Labour should be standing on firm ground. Even here in the Tory heartland the CBI clamours for more spending: Crossrail, high-speed rail, super-fast broadband and a mega nuclear build are on their shopping list. Yet they want prudence, too, the deficit slashed and "the public sector" cut: their "public sector" is anything not affecting their particular business. Above all, they want a Conservative win, so David Cameron gets their plaudits although his cuts would harm a sizable number of their companies. But then the irrational CBI always wants Conservative tax cuts while doing nicely on Labour spending.

Conservative HQ worries that Cameron's austerity pledge was an error, but the Tories are saddled with the foolish promise to cut the deficit deeper and faster than Labour. Had they super-glued themselves to Labour spending plans, they would look a lot less threatening now. But Labour, too, is hamstrung by its unnecessary fiscal rectitude bill, binding itself to cut the deficit in half in just four years, copying the Tories again. That makes the dividing line shaky, with both Labour and Conservatives "choking off" the stimulus dangerously early with growth-stunting cuts. All three parties promise Nick Clegg's "savage cuts" – a lousy choice for voters. But there are other options.

Today a detailed study by economists and tax experts spells out how tax reform could take the brunt of raising the funds to cut the deficit. Compass, the centre-left pressure group, has again come up with the new thinking that Labour's high command seems to lack. In Place of Cuts – whose authors include Howard Reed, the former chief economist of the Institute for Public Policy Research, and Richard Murphy, of Tax Research UK – offers a plan to rebalance the tax system so that the rich pay a fairer share, and enough cash is raised to avoid frontline cuts.

The tax system has become more regressive in the last 30 years, so that the poorest tenth pay 46% of their earnings in tax while the richest tenth only pay 34%. That tax shift coincided with a widening gap in earnings: the richest fifth of households take 51% of national income while the poorest fifth receive 3%. By raising the top tax rate to 50% for earnings over £100,000 and uncapping the top rate of national insurance, the balance can be reset.

Other necessary reforms would set capital gains tax back where it was under Nigel Lawson, at the same rate as income tax – to stop the rich rebranding much of their income as capital gains, only taxed at 18%. That is a key reason why on average they pay only 34% tax, and not the 40% they should. To help the lowest paid, the 10p tax band would be restored and the basic rate put back to 22%. Non-doms could no longer pretend to live in Monaco while living in the UK for four working days a week. A Tobin tax on financial transactions, tougher tax-avoidance measures, and the axing of Trident, ID cards, aircraft carriers and fighter planes, brings total savings to £47bn a year. Apologies for this crude summary: don't post objections until you read the technical details for yourself to see how this can be done.

The net result is this: these reforms would raise enough over the next four years to pay down as much of the deficit as necessary. At the same time, 90% of taxpayers would be better off, while the top 10% would contribute a fairer share of their incomes. It does hit top-rate taxpayers hard – the cumulative effect of these changes will add 12.6% to their tax bills, most of that paid by the top few per cent.

Is that politically feasible? Yes, if the Labour cabinet has the nerve to break with everything it has done so far. New exigencies require new policies, and it's time to break with the past. There are no votes to be lost by this. Few of the top 10% of earners vote Labour – and their complaints would be drowned out by the other 90%. A curious paralysis has gripped the country where the mostly idle threats of a few high-fliers to flap off to Zug or St Helier send a frisson of panic down the spines of the nervous. Research by the Work Foundation shows how few would go: most are born and bred here, with families, children in school and elderly parents. Tightening the non-dom rules would mean they'd have to stay well away or pay tax like everyone else.

Politically, boldness such as this would leave Cameron and George Osborne again defending the wealth of the very few against the interests of the many. Would most people prefer cuts in schools, hospitals, Sure Starts, police and just about everything else? Believe not a word the parties say about protecting frontline services: the cuts they plan are deeper than anything before and can't be confined to "bureaucrats" and "quangos". They will hurt everyone, they risk the recovery, and will cause another wave of unemployment.

Among the startling figures in this report is the true cost of public sector cuts. Assuming a 10% cut in the 5 million public employees, 500,000 would lose their jobs. The sums here show that the gains are small compared with the cost to the state of added unemployment – and that's without the upfront cost of redundancy pay.

With the pre-budget report two weeks away, Alistair Darling and his team should send out today for a hundred copies of this report. Without adopting all these reforms, here are better ways to raise the money than 10% cuts across the board. Look at today's YouGov poll for Compass: 92% agree that the "government should change the tax system to ensure that the richest households pay at least the same percentage of tax as the poorest households"; and 72% want the 10p tax band restored for low earners. Presented with the whole parcel of Compass reforms, 62% support it, while 25% fear that "many high-paid people and international companies would move to other countries and Britain's economy would suffer". If Labour asked the right political questions it would get political replies that touch that fundamental sense of fairness and economic good sense.

Source: http://www.guardian.co.uk/commentisfree/2009/nov/23/cuts-tax-deficit-brown-cameron