Has Ed Miliband really given up on New Labour?

Miliband promises to carry forward “New Labour insights” in speech to CBI.

Perhaps the most notable thing about Ed Miliband's speech to the CBI this morning was his immediate praise for New Labour's approach to business. After just 119 words, he said:

New Labour's insight in the 1990s was to recognise that we needed to be a party that understood wealth creation as well as its distribution, that we needed to be for economic prosperity as well as social justice, and that solving our society's problems could not be done without a partnership between government and business.

With Alan Johnson as shadow chancellor, John Denham as the shadow business secretary and Douglas Alexander as the shadow work and pensions secretary, we intend to carry forward all of these New Labour insights.

The decision to reference New Labour so warmly marks a contrast with Miliband's first days as leader. In his first TV interview with Andrew Marr he was asked: "Does New Labour still apply?" and memorably replied: "The era of New Labour has passed."

It was the sort of comment designed to produce headlines such as "Miliband declares New Labour dead" and so it did. It's no surprise that Miliband is keen to emphasise his New Labour credentials in front of a business audience, but even that is a trick borrowed from the Blair playbook.

It is, of course, possible to break with New Labour while still appreciating some of its most important insights. But few would deny that this represents an unresolved tension in the Miliband project.

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