Will Osborne's 45p tax gamble pay off?

Despite the political riskiness of such a move, the 50p tax rate will be scrapped in this week's Bud

Since George Osborne became Chancellor in May 2010, the 50p rate of tax has been a political headache. Instinctively a low tax Conservative, he has been unable to cut the top rate of tax because of his commitment to deficit reduction and the difficulty of justifying such a move as people across the country face unemployment and pay freezes.

The extraordinarily public negotiations over Wednesday's Budget over the last few weeks have shown that scrapping the 50p rate is high on the agenda. Last week, it was suggested it could be slashed as low as 40p. Today, the Telegraph reports that it is going to be cut to 45p from April 2013.

Osborne's argument is that the tax undermines investment and entrepreneurship. The government will cite figures which show that the tax has not raised as much revenue as hoped. When Alistair Darling introduced the tax in 2009, it was predicted it would raise £2.6bn, but reportedly the figure is in the hundreds of millions. Osborne will claim that cutting the tax to 45p could in fact raise more money as less people will avoid it.

It is difficult to see this flying with the public. The fact remains that this is a very popular tax: the polls have consistently shown overwhelming public support for the 50p rate. Last September, YouGov found that 59 per cent wanted to keep the tax -- including 50 per cent of Tory voters -- while just 23 per cent overall wanted to scrap it. A ComRes poll found that 48 per cent would like to see it raised to 60p, while 33 per cent did not.

Most Liberal Democrats are likely to be uncomfortable with the move, which is to be offset with a so-called "tycoon tax" aimed at preventing tax avoidance. Nick Clegg will insist that the "rich will pay more" after the Budget, while the increase in the tax-free personal allowance is expected to be speeded up. The tax threshold was due to be raised to £10,000 from April 2015, but Osborne could indicate that this will be moved forward a year.

Yet for all these moves to neutralise it, cutting the 50p rate, which only affects those earning over £150,000, remains potentially explosive. Stephen Williams, co-chair of the Lib Dem Treasury committee, told the BBC yesterday: "I certainly don't think that now would be the right time to announce the abolition of the 50p or the reduction of the 50p rate of tax. 2012 is going to be quite a difficult year for many families up and down the country."

As my colleague George Eaton wrote last week, the attack lines for Labour write themselves. Tax cuts for the rich are a difficult sell at the best of times. When the rest of the country remains mired in economic strife, it looks like a political impossibility.

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

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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

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Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.