Is Osborne really about to give people on £100k a tax cut?

The coalition’s travails over child benefit mean Osborne may revisit his decision to raise the perso

As we close in on the Budget, most eyes are still fixed on the fate of the 50p tax rate. Ignore for a moment some of the squeals from Labour on this issue (more in excited anticipation that it will be axed than horror) and spare a thought for the dwindling band of true Tory modernisers. Their two central ambitions over recent years have been to demonstrate an unswerving commitment to the National Health Service, and to show that they could govern the economy – and tax policy in particular – in the interests of the broad majority rather than the affluent elite. They are struggling to believe that, having watched the coalition conspicuously squander the first of these strategic objectives, it could be planning to deliver the last rites to the second, too.

Yet whatever the decision on the 50p tax rate, the heated debate over it risks obscuring another more nuanced, but still highly revealing choice facing Goerge Osborne. Who should benefit from the widely expected and costly increase in personal tax allowances: the vast majority of all taxpayers, including individuals to over £100,000 a year (and indeed households on £200,000), or just basic-rate taxpayers? It's an important issue in its own right – and one that has been given fresh impetus by the coalition's travails over child benefit.

To understand why this is the case, turn the clock back to 2010 when the personal allowance was first increased and the decision taken to limit the gains to basic-rate taxpayers. This was achieved by lowering the income threshold at which the 40p rate starts in order to cancel out the gains for higher-rate taxpayers – leaving them no better or worse off. Creating more 40p tax-rate payers has obvious political downsides. However, it makes the personal allowances policy both less regressive and significantly less costly. The savings could be used to help reverse this year's cuts to tax credits.

One of the main reasons why there was such a hostile reaction from many quarters to the initial decision to target the gains from the personal allowance in 2010 was the disastrous way it got caught up with Osborne's proposal to abolish child benefit for households with a higher-rate taxpayer. It meant those basic-rate taxpayers who found themselves shunted into the 40p rate not only faced a higher marginal tax rate but were also set to lose £1,750 of child benefit if they had two children.

This was pure political poison. Consequently, when a further increase in the personal allowance was announced in 2011, a different approach was adopted and the gains went to higher-rate taxpayers, too.

Which brings us to next week's Budget and how the decision that is set to be made on revising the policy on child benefit could also affect the one on personal allowances.

To date, the coalition's argument on child benefit has been that, given the scale of the deficit, the state can no longer afford to pay it to households with someone earning above £42,500; indeed, it is also argued that it is morally unfair to ask low-income families to contribute towards higher earners' child benefit. In which case you might well ask why we can afford tax cuts for individuals earning £100,000 (and households with a joint income over £200,000), regardless of whether they have children. You might also ask why it is fair to ask the same low-income family to contribute towards the cost of these tax cuts for the affluent.

I don't know how the coalition proposes to answer this. But as things stand they'll need to do so next Wednesday. Pity the poor soul in the Treasury being tasked with drafting the "lines to take" for ministers.

There is, however, a potential get-out clause for them. The approach now being touted as the likely change to Osborne's child benefit policy is to means-test the benefit at a higher level of income – say, £50,000 rather than £42,500. Whatever other problems this creates (and there are many), it will make it possible to restrict gains from an increased personal allowance to basic-rate taxpayers without creating the toxic side effect of stripping child benefit from those who get tipped into the 40p tax band. The coalition could, if it so wished, show that its priority really is basic-rate taxpayers (and in doing so save money).

We'll know soon enough. My tentative hunch is that the government won't opt to restrict the gains from increased allowances to 20p tax-rate payers – even though it is clearly more progressive and cheaper. I doubt the Chancellor will be willing to incur the price of creating more 40p taxpayers. If this is the case, the coalition will have some explaining to do, not least to its own backbench rebels on child benefit, about why a family on £50,000 should lose cash support while individuals without kids earning double that amount should get a tax cut.

And all this, of course, is before we get to the decision on whether to abolish the 50p tax rate . . .

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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Workers' rights after Brexit? It's radio silence from the Tories

Theresa May promised to protect workers after leaving the EU. 

In her speech on Tuesday, Theresa May repeated her promise to “ensure that workers’ rights are fully protected and maintained".  It left me somewhat confused.

Last Friday, my bill to protect workers’ rights after Brexit was due to be debated and voted on in the House of Commons. Instead I sat and watched several Tory MPs speak about radios for more than four hours.

The Prime Minister and her Brexit Secretary, David Davis, have both previously made a clear promise in their speeches at Conservative Party conference to maintain all existing workers’ rights after Britain has left the European Union. Mr Davis even accused those who warned that workers’ rights may be put at risk of “scaremongering". 

My Bill would simply put the Prime Minister’s promise into law. Despite this fact, Conservative MPs showed their true colours and blocked a vote on it through filibustering - speaking for so long that the time runs out.

This included the following vital pieces of information being shared:

David Nuttall is on his second digital radio, because the first one unfortunately broke; Rebecca Pow really likes elephant garlic (whatever that is); Jo Churchill keeps her radio on a high shelf in the kitchen; and Seema Kennedy likes radio so much, she didn’t even own a television for a long time. The bill they were debating wasn’t opposed by Labour, so they could have stopped and called a vote at any point.

This practice isn’t new, but I was genuinely surprised that the Conservatives decided to block this bill.

There is nothing in my bill which would prevent Britain from leaving the EU.  I’ve already said that when the vote to trigger Article 50 comes to Parliament, I will vote for it. There is also nothing in the bill which would soften Brexit by keeping us tied to the EU. While I would personally like to see rights in the workplace expanded and enhanced, I limited the bill to simply maintaining what is currently in place, in order to make it as agreeable as possible.

So how can Theresa May's words be reconciled with the actions of her backbenchers on Friday? Well, just like when Lionel Hutz explains to Marge in the Simpsons that "there's the truth, and the truth", there are varying degrees to which the government can "protect workers' rights".

Brexit poses three immediate risks:

First, if the government were to repeal the European Communities Act without replacing it, all rights introduced to the UK through that piece of legislation would fall away, including parental leave, the working time directive, and equal rights for part-time and agency workers. The government’s Great Repeal Bill will prevent this from happening, so in that sense they will be "protecting workers’ rights".

However, the House of Commons Library has said that the Great Repeal Bill will leave those rights in secondary legislation, rather than primary legislation. While Britain is a member of the EU, there is only ever scope to enhance and extend rights over and above what had been agreed at a European level. After Brexit, without the floor of minimum rights currently provided by the EU, any future government could easily chip away at these protections, without even the need for a vote in Parliament, through what’s called a "statutory instrument". It will leave workers’ rights hanging by a thread.

The final change that could occur after we have left the EU is European Court rulings no longer applying in this country. There are a huge number of rulings which have furthered rights and increased wages for British workers - from care workers who do sleep-in shifts being paid for the full shift, not just the hours they’re awake; to mobile workers being granted the right to be paid for their travel time. These rulings may no longer have legal basis in Britain after we’ve left. 

My bill would have protected rights against all three of these risks. The government have thus far only said how they will protect against the first.

We know that May opposed the introduction of many of these rights as a backbencher and shadow minister; and that several of her Cabinet ministers have spoken about their desire to reduce employment protections, one even calling for them to be halved last year. The government has even announced it is looking at removing the right to strike from transport workers, which would contradict their May’s promise to protect workers’ rights before we’ve even left the EU.

The reality is that the Conservatives have spent the last six years reducing people’s rights at work - from introducing employment tribunal fees which are a barrier to justice for many, to their attack on workers’ ability to organise in the Trade Union Act. A few lines in May’s speech doesn’t undo the scepticism working people have about the Tories' intentions in this area. Until she puts her money where her mouth is, nor should they. 

Melanie Onn is the Labour MP for Great Grimsby.