Tories abandon plans to abolish 50p tax rate -- for now

The top rate of tax will stay in place until 2015, according to the latest reports.

The 50p tax rate has been a persistent political headache for the Tories -- and now it looks as if it is not going anywhere until 2015.

David Cameron and George Osborne have always maintained that the top rate of tax, introduced by Gordon Brown in 2010, was a temporary measure. It was suggested in August that it could be cut to 45p as soon as this year or next.

However, the Telegraph today reports that the Prime Minister and Chancellor have concluded that cutting the tax rate is politically impossible in the near future, as they wish to avoid looking like they are pandering to the rich.

Asked about the 50p tax rate on the Andrew Marr Show yesterday, Cameron said:

When you're taking the country through difficult times and difficult decisions, you've got to take the country with you. That means permanently trying to make the argument that what you're doing is fair and seen to be fair.

Given that the public sector pay freeze has effectively been extended until 2015, it would be bad politics to remove the 50p rate. Osborne actually said in his 2009 Conservative conference speech that it would be "grossly unfair" to scrap the top rate of tax while public sector pay remained frozen. Polls have shown that the public broadly support the 50p rate.

On top of the issue of presentation is, simply, the economics. HMRC is currently preparing a report on the top tax rate. While earlier reports suggested that it would find only modest economic returns, it is now expected to show a "surge" in revenues totalling hundreds of millions of pounds in the first year alone. This is despite Osborne's declaration in the last Budget that high rates of personal tax "crush enterprise, undermine aspiration and often undermine tax revenues as people avoid them".

The 50p rate has been a sore point in the coalition, with Liberal Democrats arguing that it must not be removed unless it is replaced by another tax on wealth. Danny Alexander memorably declared that anyone who wanted to scrap the tax was in "cloud cuckoo land", although he was soon contradicted. After Nick Clegg's concession last week that the mansion tax is unlikely to happen, my colleague George Eaton noted:

The corollary of this is that the 50p tax rate is likely to remain for the duration of the parliament. The Lib Dems will not accept the abolition of the top rate unless it is replaced with some kind of wealth tax.

Yet backbench Tories remain opposed to the tax. In the Budget in March, Osborne is expected to indicate that the decision to retain the 50p rate until 2015 is still under review.

Change may be off the table for the moment, but the pressure from backbenchers on Conservative top command will remain.

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

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Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

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