Osborne aims to scrap the 50p rate by 2013

Chancellor pencils in 2013 as the earliest possible opportunity to remove the top rate.

George Osborne made his ambition to scrap the 50p tax rate clear in last month's Budget. "[T]he 50 pence tax rate would do lasting damage to our economy if it were to become permanent. That is why I regard it as a temporary measure," he said.

Now, for the first time, we learn that the Chancellor has "pencilled in" 2013 as the earliest possible opportunity to remove the top rate. It's no coincidence that this is the same year that the public-sector pay freeze ends. Osborne, a keen political strategist, won't want to hand a tax cut to the richest 1 per cent until he can provide relief elsewhere. But I'd still expect Labour to contrast the "temporary" 50p rate with the "permanent" VAT rise.

HM Revenue and Customs is about to begin its review of how much money the new rate brings in and, as David Laws revealed last month in the Financial Times, the Treasury believes that the bulk of the revenue expected from the 50p rate is "lost in avoidance". I'd be surprised if the top rate raises £2.4bn a year (the initial Treasury forecast) but I'd still expect the Chancellor to benefit.

Those who claim that the new rate will bring in no revenue are fond of pointing out that Treasury receipts increased after Nigel Lawson reduced the top rate from 60 per cent to 40 per cent in 1988. But this had less to do with the Laffer curve than the fact that fiscal drag (when earnings rise faster than tax thresholds) meant high numbers of people were sucked into the 40p band, more than compensating for the removal of the 60p band.

In the meantime, Labour needs to establish a fixed position on the 50p rate. Since Ed Miliband became leader, he has described the top rate as "permanent", although Alan Johnson's tenure as shadow chancellor brought a greater emphasis on merely retaining it "for this parliament". At the same time, Ed Balls has suggested that reducing the starting threshold from £150,000 to £100,000 is still an option.

Then again, the shadow chancellor has also warned against turning "rates into principles" and has emphasised that "the principle is the tax system should be progressive". This leaves open the possibilty of Labour supporting the removal of the 50p rate in favour of a range of new property taxes.

As Balls appeared to suggest, in the event that the 50p rate raises little or no revenue, his party may need a plan B.

George Eaton is political editor of the New Statesman.

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Forget planning for no deal. The government isn't really planning for Brexit at all

The British government is simply not in a position to handle life after the EU.

No deal is better than a bad deal? That phrase has essentially vanished from Theresa May’s lips since the loss of her parliamentary majority in June, but it lives on in the minds of her boosters in the commentariat and the most committed parts of the Brexit press. In fact, they have a new meme: criticising the civil service and ministers who backed a Remain vote for “not preparing” for a no deal Brexit.

Leaving without a deal would mean, among other things, dropping out of the Open Skies agreement which allows British aeroplanes to fly to the United States and European Union. It would lead very quickly to food shortages and also mean that radioactive isotopes, used among other things for cancer treatment, wouldn’t be able to cross into the UK anymore. “Planning for no deal” actually means “making a deal”.  (Where the Brexit elite may have a point is that the consequences of no deal are sufficiently disruptive on both sides that the British government shouldn’t  worry too much about the two-year time frame set out in Article 50, as both sides have too big an incentive to always agree to extra time. I don’t think this is likely for political reasons but there is a good economic case for it.)

For the most part, you can’t really plan for no deal. There are however some things the government could prepare for. They could, for instance, start hiring additional staff for customs checks and investing in a bigger IT system to be able to handle the increased volume of work that would need to take place at the British border. It would need to begin issuing compulsory purchases to build new customs posts at ports, particularly along the 300-mile stretch of the Irish border – where Northern Ireland, outside the European Union, would immediately have a hard border with the Republic of Ireland, which would remain inside the bloc. But as Newsnight’s Christopher Cook details, the government is doing none of these things.

Now, in a way, you might say that this is a good decision on the government’s part. Frankly, these measures would only be about as useful as doing your seatbelt up before driving off the Grand Canyon. Buying up land and properties along the Irish border has the potential to cause political headaches that neither the British nor Irish governments need. However, as Cook notes, much of the government’s negotiating strategy seems to be based around convincing the EU27 that the United Kingdom might actually walk away without a deal, so not making even these inadequate plans makes a mockery of their own strategy. 

But the frothing about preparing for “no deal” ignores a far bigger problem: the government isn’t really preparing for any deal, and certainly not the one envisaged in May’s Lancaster House speech, where she set out the terms of Britain’s Brexit negotiations, or in her letter to the EU27 triggering Article 50. Just to reiterate: the government’s proposal is that the United Kingdom will leave both the single market and the customs union. Its regulations will no longer be set or enforced by the European Court of Justice or related bodies.

That means that, when Britain leaves the EU, it will need, at a minimum: to beef up the number of staff, the quality of its computer systems and the amount of physical space given over to customs checks and other assorted border work. It will need to hire its own food and standards inspectors to travel the globe checking the quality of products exported to the United Kingdom. It will need to increase the size of its own regulatory bodies.

The Foreign Office is doing some good and important work on preparing Britain’s re-entry into the World Trade Organisation as a nation with its own set of tariffs. But across the government, the level of preparation is simply not where it should be.

And all that’s assuming that May gets exactly what she wants. It’s not that the government isn’t preparing for no deal, or isn’t preparing for a bad deal. It can’t even be said to be preparing for what it believes is a great deal. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.