Whatever is decided on the 50p tax rate, it will cost Osborne dear

The 50p tax rate is the first occasion Miliband has been properly ahead of the curve.

Ed Miliband has outmaneuvered George Osborne. That may seem a strange thing to be writing less than a week after Labour's leader tried to clamber into the Dispatch box and hide, rather than dare to raise the issue of the economy at Prime Minister's questions. But by floating the prospect of axing the 50p tax rate, our Chancellor has wandered blithely into Miliband's well-laid trap.

Actually, it hasn't even been that well-laid. For the best part of the year, Red Ed has been trying to re-cast himself as the People's Ed. He's felt the pinch of the Squeezed Middle, pointed to the betrayal of "Britain's promise", and attempted to align himself with "the many", whilst David Cameron courted an affluent "few".

This stuff hardly represents political rocket science. It's not even political A-level science. Very few election campaigns have been launched with the slogan; "I am committed to governing for the few, not the many". The Squeezed Middle are merely the latest incarnation of Middle England, Worcester Woman, Mondeo Man and the C2s.

But it's worked. Osborne, for reasons best known to himself, has fallen for it. Actually, he hasn't so much as fallen for it, as let out a hearty "Wahoooo!" and leapt right on in.

Let's think about this for a second. Here are a chancellor and coalition who have spent their entire period in government talking the language of austerity. This time last year, Cameron's assessment was blunt; "I think people do understand the basic proposition, which is we are living beyond our means. We are spending too much and taxing too little and building up our debts". As recently as last week, Osborne was himself holding to the iron line; ""We will stick to the deficit reduction plan we have set out. It is the rock of stability on which our economy is built". To underline the importance of this craggy fiscal outcrop, Britain's most cherished public services have been consistently hurled against it; police cuts in the wake of the riots, army cuts in the run up to the anniversary of 9/11.

Yet Osborne is now seriously contemplating turning that policy, or perhaps more importantly, that narrative, on its head. Suddenly we are to be told "actually, we are taxing too much". Or rather, "we are taxing the richest too much". We are to be told too, "we will not stick to the deficit reduction plan". Or at least, "we will not stick to the deficit reduction plan where it inconveniences the wealthiest". And those police officers and soldiers who were told their jobs were being axed to bring the nation's accounts into balance are to be shown they were, in truth, dispensed with to provide new yachts and private jets for the super-rich.

The Chancellor may point to the statistics, such as the Institute for Fiscal Studies analysis that queries whether the 50p rate actually raises any income at all. He may cite the experts, such as the 20 economists who entirely spontaneously wrote to the Financial Times last week calling for the rate to be abolished.

It won't matter. If George Osborne abolishes the 50p tax rate, he'll be blown away. For Ed Miliband and the Labour party it will be like shooting fish in a barrel. In fact, it will be more like climbing into the barrel and opening up with an Uzi.

The few instead of the many. The merciless squeezing of the middle. The breaking of Britain's promise. Miliband won't have to say, "listen to me". He will simply say "listen to Osborne".

Even if Osborne belatedly tries to scramble to safety, the trap will still be sprung. If the 50p rate remains, it represents another U-turn, another victory for the opposition. And not over something peripheral, like forests, or school sports. This retreat will have been conducted over an issue that goes to the heart of the government's economic agenda, and in full view of a group of increasingly fractious and rebellious backbench Tory right-wingers.

Since becoming Labour leader, Miliband has not been punching his weight. And he wasn't the heaviest guy in the room to begin with.

Yes, he's landed blows on sentencing reform, welfare reform and phone hacking. But on each occasion, the punch was delayed, or a follow up to an opening made by others.

The 50p tax rate is the first occasion Miliband has been properly ahead of the curve. He has followed a strategy, rather than exploit an opportunity, and it has paid off. Osborne, by contrast, has been staggeringly inept. Possibly that ineptness has been brought about by complacency; a feeling that Labour's inability to make inroads on the economy has gave him license to do as he pleases.

Either way, he is now trapped between Miliband and a hard place. Whatever decision is now made on the 50p tax rate, it will cost Osborne dear.

Getty Images.
Show Hide image

Brexit is teaching the UK that it needs immigrants

Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past.

Why did the UK vote to leave the EU? For conservatives, Brexit was about regaining parliamentary sovereignty. For socialists it was about escaping the single market. For still more it was a chance to punish David Cameron and George Osborne. But supreme among the causes was the desire to reduce immigration.

For years, as the government repeatedly missed its target to limit net migration to "tens of thousands", the EU provided a convenient scapegoat. The free movement of people allegedly made this ambition unachievable (even as non-European migration oustripped that from the continent). When Cameron, the author of the target, was later forced to argue that the price of leaving the EU was nevertheless too great, voters were unsurprisingly unconvinced.

But though the Leave campaign vowed to gain "control" of immigration, it was careful never to set a formal target. As many of its senior figures knew, reducing net migration to "tens of thousands" a year would come at an economic price (immigrants make a net fiscal contribution of £7bn a year). An OBR study found that with zero net migration, public sector debt would rise to 145 per cent of GDP by 2062-63, while with high net migration it would fall to 73 per cent. For the UK, with its poor productivity and sub-par infrastructure, immigration has long been an economic boon. 

When Theresa May became Prime Minister, some cabinet members hoped that she would abolish the net migration target in a "Nixon goes to China" moment. But rather than retreating, the former Home Secretary doubled down. She regards the target as essential on both political and policy grounds (and has rejected pleas to exempt foreign students). But though the same goal endures, Brexit is forcing ministers to reveal a rarely spoken truth: Britain needs immigrants.

Those who boasted during the referendum of their desire to reduce the number of newcomers have been forced to qualify their remarks. On last night's Question Time, Brexit secretary David Davis conceded that immigration woud not invariably fall following Brexit. "I cannot imagine that the policy will be anything other than that which is in the national interest, which means that from time to time we’ll need more, from time to time we’ll need less migrants."

Though Davis insisted that the government would eventually meet its "tens of thousands" target (while sounding rather unconvinced), he added: "The simple truth is that we have to manage this problem. You’ve got industry dependent on migrants. You’ve got social welfare, the national health service. You have to make sure they continue to work."

As my colleague Julia Rampen has charted, Davis's colleagues have inserted similar caveats. Andrea Leadsom, the Environment Secretary, who warned during the referendum that EU immigration could “overwhelm” Britain, has told farmers that she recognises “how important seasonal labour from the EU is to the everyday running of your businesses”. Others, such as the Health Secretary, Jeremy Hunt, the Business Secretary, Greg Clark, and the Communities Secretary, Sajid Javid, have issued similar guarantees to employers. Brexit is fuelling immigration nimbyism: “Fewer migrants, please, but not in my sector.”

The UK’s vote to leave the EU – and May’s decision to pursue a "hard Brexit" – has deprived the government of a convenient alibi for high immigration. Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past. Brexit may have been caused by the supposed costs of immigration but it is becoming an education in its benefits.

George Eaton is political editor of the New Statesman.