Miliband’s smart move on bank bonuses

The Labour leader’s call for an extended bonus tax is good politics and good economics.

Ed Miliband's decision to call for the extension of the tax on bankers' bonuses is good politics and good economics. At a time when ministers are backing away from a confrontation with the banks, Miliband has seized an opportunity to win favourable headlines. The coalition will struggle to oppose him without implying, as Peter Mandelson once put it, that the rich have "suffered enough" (not a popular political message in these straitened times).

So long as the banks refuse to show pay restraint, it makes sense for the government to raise some much-needed revenue. Alistair Darling's original 50 per cent tax on bonuses over £25,000 raised £3.5bn, four times more than the government originally forecast. By contrast, the coalition's bank levy is expected to raise just £1.25bn. Miliband's suggestion that now is the wrong time to be "cutting taxes for the banks" will resonate with voters suffering the biggest squeeze on living standards since the 1970s.

It's worth adding that Darling's tax did not lead to an "exodus" from the City of London. An analysis by PricewaterhouseCoopers found that the gap with other jurisdictions was not wide enough to justify a move out of London. As the FT's report noted:

[A] married banker with two children, one of them aged under six, with gross income of £250,000 and a mortgage of £750,000, would net £141,000 in the UK, after deductions for tax and social security, according to PwC's calculations. In Geneva, that same employee would take home about £156,000, 11 per cent more.

The gap with other European financial centres and the US is significantly smaller. The same worker would net £150,000 in Paris, £149,000 in Frankfurt and £145,000 in New York . . . While the tax hit becomes much more significant among top earners, such as those earning in excess of £1m, it is difficult for senior bankers and traders to relocate in isolation, without more junior employees on their team or support functions.

Miliband's announcement is tailor-made to appeal to two of the groups he is most concerned with: "the squeezed middle" and disaffected Liberal Democrats. Senior Lib Dems were exasperated by Cameron's suggestion that the banks are "an easy scapegoat" and few are more angered by the bankers' recklessness than the middle classes. It's hardly election-winning stuff but, in the current circumstances, a little bit of populism will do Miliband no harm.

George Eaton is political editor of the New Statesman.

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.