Death and taxes

How will Labour respond to the coalition’s VAT rise?

Two things in life are inevitable, said Benjamin Franklin, death and taxes. The Conservatives campaigned against "Labour's death tax" and against "Labour's jobs tax". But Labour left it to the Lib Dems to campaign against the Tory VAT tax bombshell.

So how will Labour characterise the VAT rise that will bring an end to the New Year sales? They've got a little time to work it out, but it's likely that "death" will play a central role, as the tax rise is felt by everyone and Labour argues that the change is going to kill the recovery.

Ed Balls has a video on his website where he basically says, "I told you so." Last week he urged people to sign up to his campaign to stop the VAT tax rise -- a clever way to capture contact details for party members that he perhaps copied from Ed Miliband's campaign for a living wage and David Miliband's Movement for Change.

Apparently Balls argued that Labour should rule out a VAT increase before the last election, another argument he lost with Gordon Brown and Alistair Darling, who didn't want to box themselves in. Balls has certainly made the most of it and, positioning himself well as an active and effective opponent of the coalition.

But if Balls didn't wanted to rule out a VAT increase, which taxes did he want a Labour government to raise? The official Labour position is that the deficit should be cut using a 2:1 ratio of spending cuts and tax rises -- that's 67 per cent cuts and 33 per cent tax rises.

In opposition, the Tories talked about using an 80:20 ratio and came clean in the Budget about how the 20 per cent of taxes are going to be raised. We have to wait for the spending review, after the conclusion of Labour's leadership election, to find out about the 80 per cent spending cuts.

There is, of course, zero political incentive for an opposition to spell out the alternative tax rises that it would have implemented. However, calculations by Demos show how that the government could have used a 67:33 ratio and raised the necessary £17bn without raising VAT.

Think tanks don't have to get elected, but the package of increases in income tax, CGT on primary residences and taxing carbon is a reasonable, realistic and realpolitik alternative.

Despite being the self-proclaimed "turn-the-page candidate", Diane Abbott has so far had nothing to say about the opportunity to reform and restructure our tax system. If not now, when? Andy Burham says Labour got intoxicated by big business but hasn't developed that into a policy position on tax. What does he think of the cut in corporation tax, for example?

David Miliband's conversion to the Lib Dem mansion tax on houses worth £2m and Ed Miliband's moral argument for keeping the 50p top rate of income tax for good are the only tangible interventions that any of the candidates have made into tax-rise territory. But, if the five are to preserve their own credibility and the integrity of Labour's debate, these are unlikely to be the last.

Richard Darlington is head of the Open Left project at Demos.

Richard Darlington is Head of News at IPPR. Follow him on Twitter @RDarlo.

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The tale of Battersea power station shows how affordable housing is lost

Initially, the developers promised 636 affordable homes. Now, they have reduced the number to 386. 

It’s the most predictable trick in the big book of property development. A developer signs an agreement with a local council promising to provide a barely acceptable level of barely affordable housing, then slashes these commitments at the first, second and third signs of trouble. It’s happened all over the country, from Hastings to Cumbria. But it happens most often in London, and most recently of all at Battersea power station, the Thames landmark and long-time London ruin which I wrote about in my 2016 book, Up In Smoke: The Failed Dreams of Battersea Power Station. For decades, the power station was one of London’s most popular buildings but now it represents some of the most depressing aspects of the capital’s attempts at regeneration. Almost in shame, the building itself has started to disappear from view behind a curtain of ugly gold-and-glass apartments aimed squarely at the international rich. The Battersea power station development is costing around £9bn. There will be around 4,200 flats, an office for Apple and a new Tube station. But only 386 of the new flats will be considered affordable

What makes the Battersea power station development worse is the developer’s argument for why there are so few affordable homes, which runs something like this. The bottom is falling out of the luxury homes market because too many are being built, which means developers can no longer afford to build the sort of homes that people actually want. It’s yet another sign of the failure of the housing market to provide what is most needed. But it also highlights the delusion of politicians who still seem to believe that property developers are going to provide the answers to one of the most pressing problems in politics.

A Malaysian consortium acquired Battersea power station in 2012. Initially, it promised to build 636 affordable units. This was pretty meagre, but with four developers already having failed to develop the site, it was still enough for Wandsworth council to give planning consent. By the time I wrote Up In Smoke, this had been reduced to 565 units – around 15 per cent of the total number of new flats. Now the developers want to build only 386 affordable homes – around 9 per cent of the final residential offering, which includes expensive flats bought by the likes of Sting and Bear Grylls.

The developers say this is because of escalating costs and the technical challenges of restoring the power station – but it’s also the case that the entire Nine Elms area between Battersea and Vauxhall is experiencing a glut of similar property, which is driving down prices. They want to focus instead on paying for the new Northern Line extension that joins the power station to Kennington. The slashing of affordable housing can be done without need for a new planning application or public consultation by using a “deed of variation”. It also means Mayor Sadiq Khan can’t do much more than write to Wandsworth urging the council to reject the new scheme. There’s little chance of that. Conservative Wandsworth has been committed to a developer-led solution to the power station for three decades and in that time has perfected the art of rolling over, despite several excruciating, and occasionally hilarious, disappointments.

The Battersea power station situation also highlights the sophistry developers will use to excuse any decision. When I interviewed Rob Tincknell, the developer’s chief executive, in 2014, he boasted it was the developer’s commitment to paying for the Northern Line extension (NLE) that was allowing the already limited amount of affordable housing to be built in the first place. Without the NLE, he insisted, they would never be able to build this number of affordable units. “The important point to note is that the NLE project allows the development density in the district of Nine Elms to nearly double,” he said. “Therefore, without the NLE the density at Battersea would be about half and even if there was a higher level of affordable, say 30 per cent, it would be a percentage of a lower figure and therefore the city wouldn’t get any more affordable than they do now.”

Now the argument is reversed. Because the developer has to pay for the transport infrastructure, they can’t afford to build as much affordable housing. Smart hey?

It’s not entirely hopeless. Wandsworth may yet reject the plan, while the developers say they hope to restore the missing 250 units at the end of the build.

But I wouldn’t hold your breath.

This is a version of a blog post which originally appeared here.

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