With two weeks to go to the budget, everyone’s making their bids for tax cuts. Last week 500 business people called on the chancellor to reduce the 50p top rate of income tax. I thought their argument that reducing the income tax rate would help them to create jobs was pretty specious. This would be a personal tax cut with only an indirect link to their business decisions. To boost jobs, we should do what Rachel Reeves argued this week – to use the almost £1bn unspent from George Osborne’s failed national insurance holiday to give a tax break to all small firms taking on extra workers.
And given the real squeeze on family budgets at the moment, we should be arguing for tax cuts that help them most and boost spending quickest – the temporary VAT cut proposed by Ed Balls.
However, we should also be clear that this is an argument about immediate tax priorities, not long-term tax plans. In 2009, after announcing the new top rate, Gordon Brown said:
‘It is not my desire or my wish, or the chancellor’s desire or wish, to raise the top rate of tax. That is not something that we wanted to do.’
In other circumstances we wouldn’t have raised the top rate at that time – and I think we should be clear that we would reverse it when the right circumstances come round again.
We mustn’t allow ourselves to be characterised as a party which believes that high personal tax rates are a good thing in themselves. In my view this is wrong economically and politically.
Let’s look carefully at the evidence about how much revenue is raised from this 50p rate – and how much is expected in the future. In the coming days, we will see the review from HMRC into how much the 50p rate has actually raised. In November 2010 the Treasury told parliament that it expected it to raise £12bn over the coming five years, so it would be pretty surprising if the tax increase had raised nothing as some of those calling for the reduction have argued. However, the predictions also suggested that the biggest increase in tax revenues would come from an increase to 45p rather than 50p. Furthermore, a personal tax increase is likely to raise more in the short term before people have the time to reorder their remuneration arrangements or even to leave the country. We may not like tax avoidance schemes, but we’d be silly not to accept that accountants don’t only earn a living from doing your books!
I want us to be arguing for a greater sense of responsibility from those who make it to the top of the income tree. However, using high rates of income tax to do that is a blunt, or even counterproductive, political instrument. Those without a sense of responsibility will relatively easily avoid the tax. If they move abroad, we’ve lost all the tax revenues we could have received from them.
For the far greater number who might aspire to be earning that sort of money, we risk looking as if we want to punish their ambition. If that’s the message that people hear from Labour then we’ll never get the chance to make decisions about their tax rate – or anything else for that matter.
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Jacqui Smith is former home secretary and writes the Monday Politics column for Progress
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Lol a clear move to the right of the center ground and with no respect for the views of the majority and with no grasp of the current clearly dominant public anger out there regarding tax evaders, bonus culture of legalised bribery. All those hard works and few gestures from the Government to make life easier on those struggling and suffering at the moment. Sometimes a political gesture in times of hardship can be the difference between peace and war, revolution and consensus. It shows the Government are thinking about the people the establishment forgot. This old political has been needs to read from history what occured in France when the nobility found ways to exempt themselves from tax and the people were suffering, it cost France its Royal Family and a King who tried to fight his own nobility to create fairness for his people who were in a great deal of pain. We can also turn to ancient Rome, when the “elites” embraced immigrant slavery to replace hard working Roman people, the cruelty of the “elites” meant the people were killing each other in the streets daily. It enabled Caeser to continue to import more Immigrants from Gaul creating greater instability until he bribed the people into following him. Good-bye the degraded democracy by internal elites and welcome the outsider and most talented risk taker, Leader and politician Caeser who was too much for the elites and wiped them out, even after his death those involved were slain within fifteen years of Caesers Murder.
The people are funny like that Jaqui they like to try and find out what makes an “elite” an “elite” when we upset them, they try and find out if “elites” are from say Krypton to see if they can resist the seductive overtures from madam Guillotine, or to see if their great skills enable them, nurtured by comforts, to challenge people refined and defined by struggle and challenge. My own observation is that (since the Council Leader of Barking and Dagenham has failed to turn up to the last two Assemblies to avoid taking me on) is that they are very skilled at running away. They like sounding off and seeming “tough” on policy to try and win over less than generous and amiable Corporate “elites”, but when they are held to account or asked to use intellect and debate such issues they flee and sit in a corner and feel sorry for themselves. This has been apparent during the MP’s expenses and the conduct of Senior Councillors I have come across. Hence the fear of democracy, of open discussion and reason. The Elites like you Jaqui only want one way conversations because you have not been defined by struggle, challenged by real risk and adversity, because if you had been you would embrace democracy and debate.
I’ll say one thing about Blair, he was the nearest any of you really had to an intelligent person willing to hold his own with Jo Public. He had courage I’ll give him that. I guess that is one of the resons we all liked him so much at the beginning because his experience was more open due to his emotional intelligence which declined with the influence of power and unpopular decision making.
Believe me I have studied this man intently beyond all the garbage he wrote and has been wrote about him. A deeply indivualistic man but a damn talented one. Whereas we look at some of ridiculous things you dreamed up when in Office and it smacks of a singular failing…lack of a practically applicable imagination. Like most people in the PLP and on Councils 110% ambition but 35% attainment. Nbecause truly great politicans understand people instinctively, deeply, beyond clumsy polls which offer basic trend information only and not core substance. Upsetting people to try and look like you are a “tough” politican Jaqui is pathetic. Because it isn’t tough…it’s stupid. Especially when people are far tougher than you are and won’t run away when they are angry at the totally regressive country this has become due to its failure to modernise and take a Lead in the world.
Without doubt Blair was a bright intelligent person, even I fell for it when in 1996 he spoke, I thought my god he might be the bloke to make labour into a real party, sadly it did not take long to understand Blair was a chap who could be swayed by others. The deal he did with brown was wrong, the love affair with Bush was total wrong.
The Murdoch’s least said the better, but in the end labour had three terms, they have now allowed in the Tories who will change this country, and I in all honesty doubt labour will ever again be able to say we are socialist, and have people believe them
I am shocked to be reading this blog, if Labour moves towards defending the richest in society without challenging the ideological cuts being shouldered by the poorest, the disabled etc then we will spend even longer in opposition! As many people highlight, we lost 5 million votes and only 1 million of them went Tory, the people we need to win back are NOT bankers, they are NOT 50p rate tax payers, they are those people New labour forgot and Jacqui Smith is outdated in her analysis here.
Fact: the 50p tax rate is massively popular.
Fact: we will lose votes if we even suggest scrapping it.
Tax cuts are probably unwise just now. The principle of progressive taxation needs advocacy in an era when many people forget why we need to share our resources fairly. Possible sources of new progressive taxation are wealth, in the form of land or property recovered through additional Council tax bands perhaps, could enable us to reduce regressive taxes like NI and VAT. The best course is to make sure those who owe tax do pay it. That may mean investing in a few more tax inspectors.
I found it staggering that we have learnt so little and that we continue to have colleagues arguing against a policy which is highly popular amongst our target voters and which speaks clearly to our values.
It might be more useful to think carefully about how we might close out tax avoidance and seek international consensus on a progressive tax approach. Isn’t that what progressives would do?
This is an excellent article. Sometimes we can seriously blur the lines between our principles and their policy manifestations. The principle is responsiblity, and that’s fixed, but the policy implications must be flexible to the evidence. It probably wouldnt be right to axe the 50p rate right now, but we have to remember there are many variables in setting tax brackets beyond just what ‘sounds right’ as a figure.