Alexander struggles to charm as he signs up for more welfare cuts

The man "more right-wing" than George Osborne received a muted response from Lib Dem delegates.

After Vince Cable's deft performance yesterday, Danny Alexander's speech to the Liberal Democrat conference fell rather flat. "Fellow plebs," he began, offering an inferior version of the most memorable line from the Business Secretary's address.

Having been described by one of his party's activists as "more right-wing" than George Osborne, Alexander was on a mission to prove that "it is not impossible to be a Liberal Democrat in the Treasury". So he hailed the progress the coalition had made towards an income tax threshold of £10,000 (adding that the Lib Dems would seek to raise it to £12,500 after the next election), trumpeted the increase in capital gains tax, and, sounding like the world's least terrifying super hero, warned tax dodgers: "we are coming to get you and you will pay your fair share". All of this was politely and even enthusiastically received, but it couldn't compensate for the jarring notes elsewhere.

While he vowed to continue to push for some form of wealth tax, he also signalled that the Lib Dems would have to sign up to further welfare cuts in 2015-16. "At £220bn, welfare is one third of all public spending - and despite our painful reforms it is still rising. We will have to look at it," he said.

Elsewhere, he unwisely mocked Ed Miliband's theme of "predistribution", an idea of considerable appeal to Lib Dem activists. "Apparently it means spending money you don’t have, without knowing where that money is going to come from in the future," he inaccurately surmised. Predictably, it failed to raise so much as a smile from the conference floor.

Offering an even more robust endorsement of George Osborne's strategy than Cable, Alexander erroneously suggested that Britain's record low borrowing rates were the result of the coalition's deficit reduction programme. Yet, as he must surely know, they owe more to the Bank of England's quantitative easing programme (which has seen it buy up hundreds of billions of UK gilts) and our non-membership of the euro (the US, in spite of the loss of its AAA rating, has seen its interest rates fall for the same reason).

Alexander declared that this hard-won "credibility" meant the UK could now afford to guarantee a series of grand projets, offering the example of Crossrail. But with the country already mired in a double-dip recession and unemployment forecast to rise next year, delegates will ask why it took the coalition so long to adopt anything resembling a growth strategy.

One political point worth noting is how little Alexander did to reach out to Labour. He referred twice to "the mess" the party left and joked hopefully that Cable won't have received a "congratulatory text message from Ed Miliband" after his speech (ironically, it was Cable who texted Miliband after the Labour leader's speech last year). The abiding impression was that, in contrast to Cable, he is far more comfortable working with the Tories than Labour. It's one reason why the party faithful struggled to warm to him today.

Chief Secretary to the Treasury Danny Alexander delivers his speech at the Liberal Democrat conference in Brighton. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Taxation without benefits: how our tax system increases inequality

We often hear the progressive income tax used as a proxy for all tax when it actually accounts for just over a quarter of the tax take.

Tax may not be the burning issue on everyone’s minds over the next month, but the Panama Papers leak has proven that the thorny issues of who pays what, and what level of tax is fair, are ones that are never too far away from the public consciousness.

One of the most important annual publications on tax is the Office for National Statistics’ Effects of Taxes and Benefits on Household Income. Published today, it shows, among other things, the proportion of income paid in tax by people at different points on the income spectrum. This may sound like the natural domain of the data nerd, but it actually tells us some rather interesting facts about our system of taxes and benefits.

First, the good news. Our much maligned welfare system is in fact a beacon of progressiveness, drastically reducing the level of income inequality we see in this country. In fact, overall, taxes and benefits are quite substantially redistributive. Without them, the income of the richest 20 per cent of households would be 14 times higher than the poorest 20 per cent. With them, that gap falls to only four times.

The benefit system as a whole decreases the Gini coefficient, the most frequently used measure of inequality, by 14 percentage points. For anyone who sees taxes and benefits as a key component in reducing economic inequality, or boosting the incomes of the poorest, or, frankly, tackling social injustice, this is rather welcome news.

But now for the bad news.

While our welfare system is undoubtedly progressive, the same cannot be said of our tax system when looked at in isolation. The poorest face a disproportionately heavy tax burden compared to the richest, paying 47 per cent of their income in tax, compared to just 34 per cent for the richest. Last year (2013/14) this difference was 45 per cent – 35 per cent, and the year before (2012/13) the gap was 43 per cent – 35 per cent. So while the proportion of income paid in tax has fallen slightly for the richest, it has increased for the poorest.

While some taxes like income tax are substantially progressive, those such as VAT and Council Tax are not. Even after adjusting for rebates and Council Tax Benefit, the poorest 10 per cent pay 7.1 per cent of their income in council tax while the richest 10 per cent pay only 1.5 per cent.

Should this matter, if our system of benefits continues to narrow the gap between rich and poor? Well, yes, not least because that system is under severe pressure from further cuts. But there are other good reasons to focus on the tax system in isolation from the benefit system.

Polling by Ipsos MORI has shown that the public believes that the tax system by itself reduces inequality, and it is often spoken of by politicians as if that is the case. We often hear the progressive income tax used as a proxy for all tax, for example, when it actually accounts for just over a quarter of the tax take.

Understanding why the tax system does not by itself reduce inequality is therefore important for both thinking about how tax revenues could be better raised, and for understanding the importance of the benefit system in narrowing the gap between the richest and the poorest.

John Hood is Acting Director of the Equality Trust