No decision on 50p tax this year, says Downing Street

Official figures show that the tax could raise nearly £13bn over five years, as PM says there will b

The 50p tax rate continues to cause tension within government, as Downing Street made it clear last night that there would be no decision on scrapping the rate this year.

A spokesman for the Prime Minister said it would be difficult to make a decision before 2012, when we will have the results of a review into the income tax rate for those earning over £150,000. Realistically, it would not be politically expedient to make a decision before 2013, when the public sector pay freeze ends. The tax is too charged with political symbolism about fairness to be scrapped without being seen to provide relief elsewhere, too.

Although Osborne has expressed doubt over how much money the tax raises, official figures released by the Treasury show that the 50p rate would raise £12.6bn over the next five years, a calculation which incorporates the chance that top earners might leave the country to avoid the tax. This would mean that by 2015-16, the 50p rate would raise £3.2bn more than if the top rate was 40p. It provides ammunition with those who disagree with a letter sent by 20 economist to the Financial Times, calling for the rate to be scrapped early.

Yet debate around the controversial tax rate rolls on. In an interview with the New Statesman's political correspondent, Rafael Behr, Danny Alexander makes clear his priorities on taxation. Here is an extract from the interview (available in this week's magazine, currently on the newsstands):

From the Treasury perspective, the main Lib Dem contribution to government has been the plan to raise the income-tax threshold to £10,000 by the end of the parliament. Alexander is very attached to this policy as a way of compensating people on low incomes for the cuts. "I think it's a direction that we will want to push further," he says. How much further? "I don't see why, in the next parliament, we shouldn't be trying to get to a situation where people in a full-time job on the minimum wage are paying no income tax at all. That, to me, is a higher priority than reducing the overall tax burden on the wealthy." I take this to mean that he rejects the aim, supported by many Conservatives and endorsed by a group of 20 economists in a public letter to the Financial Times, of abandoning the 50p top rate of income tax. "At a time when the whole country is facing serious financial challenges, the priority needs to be people on low and middle incomes."

Nick Clegg and Vince Cable have both made it clear that they have no ideological objection to scrapping the tax, as long as it is replaced by another measure to tax the rich. One measure they are looking at is a property tax. Tim Farron, the president of the Liberal Democrats, was more unequivocal:

What an outrage, in tough times like this, if the government was to give a tax cut to those who earn more than £150,000 a year and not give any more to those people who are struggling to get by, many of whom are paying the price for the profligacy and recklessness of very wealthy people that got us into this mess in the first place.

Meanwhile, Conservatives continue to be frustrated with the fact that the tax rate has not been dropped. Eric Pickles, the Communities Secretary, conceded that the tax could be dropped only "when the time is right", but added:

I think there is a strong and reasonable case to say, 'Come on, this is not actually contributing very much'. On balance, it's probably doing more damage than it's doing good.

This latest debate was triggered after 20 economists wrote to the FT to urge George Osborne to abandon the top rate in order to stimulate the faltering economy. As we at the Staggers have argued repeatedly, reversing their hike in VAT would do far more to stimulate the economy.

 

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Jeremy Corbyn's Labour conference speech shows how he's grown

The leader's confident address will have impressed even his fiercest foes. 

It is not just Jeremy Corbyn’s mandate that has been improved by his re-election. The Labour leader’s conference speech was, by some distance, the best he has delivered. He spoke with far greater confidence, clarity and energy than previously. From its self-deprecating opening onwards ("Virgin Trains assure me there are 800 empty seats") we saw a leader improved in almost every respect. 

Even Corbyn’s firecest foes will have found less to take issue with than they may have anticipated. He avoided picking a fight on Trident (unlike last year), delivered his most forceful condemnation of anti-Semitism (“an evil”) and, with the exception of the Iraq war, avoided attacks on New Labour’s record. The video which preceded his arrival, and highlighted achievements from the Blair-Brown years, was another olive branch. But deselection, which Corbyn again refused to denounce, will remain a running sore (MPs alleged that Hillsborough campaigner Sheila Coleman, who introduced Corbyn, is seeking to deselect Louise Ellman and backed the rival TUSC last May).

Corbyn is frequently charged with lacking policies. But his lengthy address contained several new ones: the removal of the cap on council borrowing (allowing an extra 60,000 houses to be built), a ban on arms sales to abusive regimes and an arts pupil premium in every primary school.

On policy, Corbyn frequently resembles Ed Miliband in his more radical moments, unrestrained by Ed Balls and other shadow cabinet members. He promised £500bn of infrastructure investment (spread over a decade with £150bn from the private sector), “a real living wage”, the renationalisation of the railways, rent controls and a ban on zero-hours contracts.

Labour’s greatest divisions are not over policy but rules, strategy and culture. Corbyn’s opponents will charge him with doing far too little to appeal to the unconverted - Conservative voters most of all. But he spoke with greater conviction than before of preparing for a general election (acknowledging that Labour faced an arithmetical “mountain”) and successfully delivered the attack lines he has often shunned.

“Even Theresa May gets it, that people want change,” he said. “That’s why she stood on the steps of Downing Street and talked about the inequalities and burning injustices in today’s Britain. She promised a country: ‘that works not for a privileged few but for every one of us’. But even if she manages to talk the talk, she can’t walk the walk. This isn’t a new government, it’s David Cameron’s government repackaged with progressive slogans but with a new harsh right-wing edge, taking the country backwards and dithering before the historic challenges of Brexit.”

After a second landslide victory, Corbyn is, for now, unassailable. Many MPs, having voted no confidence in him, will never serve on the frontbench. But an increasing number, recognising Corbyn’s immovability, speak once again of seeking to “make it work”. For all the ructions of this summer, Corbyn’s speech will have helped to persuade them that they can.

George Eaton is political editor of the New Statesman.