Why Balls is right to explore a wealth tax

Wealth taxes are fairer than those on income and they stimulate growth.

So far, beyond a pledge to restore the 50p tax rate, we've heard surprisingly little from Labour on the future of the tax system. But that changes with Ed Balls's interview in today's Independent. Whilst dismissing the wealth tax proposed by Nick Clegg as "not in the real world", he reveals that Labour is considering adopting a version of Vince Cable's mansion tax. "The likes of a mansion tax need to be on the table to be looked at," Balls tells the paper. He adds that he wants to begin "discussions" with the Business Secretary as soon as possible.

The person thinking seriously about this was not Nick Clegg but Vince Cable. I feel for Vince and the extent of his frustration [with the Coalition]…but if he wants to channel those frustrations into discussions about how we can achieve growth and jobs in the future I'll start discussions with him tomorrow.

Ball's announcement is an encouraging one. Here at the NS, we've long argued that the burden of taxation should be shifted from income towards wealth and assets (see NS editor Jason Cowley's 2010 cover story on the subject). Wealth taxes are harder to avoid than those on income (even the most determined tax avoider cannot move his or her mansion to Geneva), are progressive (wealth is even more unequally distributed than income), and benefit the economy by shifting investment away from unproductive assets and towards wealth-creating industries. For the psephologically minded, it's also worth noting that high-end property taxes are popular. A Sunday Times/YouGov poll found that 63 per cent of the public (including 56 per cent of Tories) support a mansion tax, with just 27 per cent opposed.

But, like Ed Miliband in his interview in this week's New Statesman, Balls is also clear that Labour cannot rely solely on the tax system to reduce inequality. The shadow chancellor joins Miliband in referencing the zeitgeisty theme of "predistribution" - the belief that state, rather than merely ameliorating inequalities through the tax and benefits system, should act to ensure they do not arise in the first place.

As I wrote in my blog on the subject last night, Balls and Miliband advance two main arguments for this shift of emphasis. Firstly, that the failure of the last Labour government to reduce inequality means that while redistribution is necessary (and will remain so) it is not sufficient, and secondly, that the fiscal constraints a Labour administration would face (based on current forecasts, it would inherit a deficit of £96.1bn or 5.8% of GDP) mean that it will be not able to increase tax credits (the last Labour government's primary redistributive instrument) in the manner that Tony Blair and Gordon Brown did.

As I note: "The great strength of predistribution is that it does not cost the state a penny to pursue. Rather than relying on taxation to narrow the gap between the rich and the poor, Labour will harness the instruments of legislation and regulation. Rail companies, for instance, would be barred from raising fares by more than 1% above inflation."

Expect to hear lots more on the subject when Balls and Miliband address today's Policy Network conference at the London Stock Exchange.

Shadow chancellor Ed Balls said "the likes of a mansion tax need to be on the table".

George Eaton is political editor of the New Statesman.

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Why the Liberal Democrats by-election surge is not all it seems

The Lib Dems chalked up impressive results in Stoke and Copeland. But just how much of a fight back is it?

By the now conventional post-Brexit logic, Stoke and Copeland ought to have been uniquely inhospitable for the Lib Dems. 

The party lost its deposit in both seats in 2015, and has no representation on either council. So too were the referendum odds stacked against it: in Stoke, the so-called Brexit capital of Britain, 70 per cent of voters backed Leave last June, as did 62 per cent in Copeland. And, as Stephen has written before, the Lib Dems’ mini-revival has so far been most pronounced in affluent, Conservative-leaning areas which swung for remain. 

So what explains the modest – but impressive – surges in their vote share in yesterday’s contests? In Stoke, where they finished fifth in 2015, the party won 9.8 per cent of the vote, up 5.7 percentage points. They also more than doubled their vote share in Copeland, where they beat Ukip for third with 7.3 per cent share of the vote.

The Brexit explanation is a tempting and not entirely invalid one. Each seat’s not insignificant pro-EU minority was more or less ignored by most of the national media, for whom the existence of remainers in what we’re now obliged to call “left-behind Britain” is often a nuance too far. With the Prime Minister Theresa May pushing for a hard Brexit and Labour leader Jeremy Corbyn waving it through, Lib Dem leader Tim Farron has made the pro-EU narrative his own. As was the case for Charles Kennedy in the Iraq War years, this confers upon the Lib Dems a status and platform they were denied as the junior partners in coalition. 

While their stance on Europe is slowly but surely helping the Lib Dems rebuild their pre-2015 demographic core - students, graduates and middle-class professionals employed in the public sector – last night’s results, particularly in Stoke, also give them reason for mild disappointment. 

In Stoke, campaign staffers privately predicted they might manage to beat Ukip for second or third place. The party ran a full campaign for the first time in several years, and canvassing returns suggested significant numbers of Labour voters, mainly public sector workers disenchanted with Corbyn’s stance on Europe, were set to vote Lib Dem. Nor were they intimidated by the Brexit factor: recent council by-elections in Sunderland and Rotheram, which both voted decisively to leave, saw the Lib Dems win seats for the first time on massive swings. 

So it could well be argued that their candidate, local cardiologist Zulfiqar Ali, ought to have done better. Staffordshire University’s campus, which Tim Farron visited as part of a voter registration drive, falls within the seat’s boundaries. Ali, unlike his Labour competitor Gareth Snell and Ukip leader Paul Nuttall, didn’t have his campaign derailed or disrupted by negative media attention. Unlike the Tory candidate Jack Brereton, he had the benefit of being older than 25. And, like 15 per cent of the electorate, he is of Kashmiri origin.  

In public and in private, Lib Dems say the fact that Stoke was a two-horse race between Labour and Ukip ultimately worked to their disadvantage. The prospect of Nuttall as their MP may well have been enough to convince a good number of the Labour waverers mentioned earlier to back Snell. 

With his party hovering at around 10 per cent in national polls, last night’s results give Farron cause for optimism – especially after their near-wipeout in 2015. But it’s easy to forget the bigger picture in all of this. The party have chalked up a string of impressive parliamentary by-election results – second in Witney, a spectacular win in Richmond Park, third in Sleaford and Copeland, and a strong fourth in Stoke. 

However, most of these results represent a reversion to, or indeed an underperformance compared to, the party’s pre-2015 norm. With the notable exception of Richmond’s Sarah Olney, who only joined the Lib Dems after the last general election, these candidates haven’t - or the Lib Dem vote - come from nowhere. Zulfiqar Ali previously sat on the council in Stoke and had fought the seat before, and Witney’s Liz Leffman and Sleaford’s Ross Pepper are both popular local councillors. And for all the excited commentary about Richmond, it was, of course, held by the Lib Dems for 13 years before Zac Goldsmith won it for the Tories in 2010. 

The EU referendum may have given the Lib Dems a new lease of life, but, as their #LibDemFightback trope suggests, they’re best understood as a revanchist, and not insurgent, force. Much has been said about Brexit realigning our politics, but, for now at least, the party’s new normal is looking quite a lot like the old one.