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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Paul Nuttall is like his party: sad, desperate and finished

The party hope if they can survive until March 2019, they will grow strong off disillusionment with Brexit. They may not make it until then. 

It’s a measure of how far Ukip have fallen that while Theresa May faced a grilling over her social care U-Turn and Jeremy Corbyn was called to account over his past, the opening sections of Andrew Neill’s interview with Paul Nuttall was about the question of whether or not his party has a future.

The blunt truth is that Ukip faces a battering in this election. They will be blown away in the seats they have put up a candidate in and have pre-emptively retreated from numerous contests across the country.

A party whose leader in Wales once said that climate change was “ridiculous” is now the victim of climate change itself. With Britain heading out of the European Union and Theresa May in Downing Street, it’s difficult to work out what the pressing question in public life to which Ukip is the answer.

Their quest for relevance isn’t helped by Paul Nuttall, who at times tonight cast an unwittingly comic figure. Pressing his case for Ukip’s burka ban, he said earnestly: “For [CCTV] to work, you have to see people’s faces.” It was if he had intended to pick up Nigel Farage’s old dogwhistle and instead put a kazoo to his lips.

Remarks that are, written down, offensive, just carried a stench of desperation. Nuttall’s policy prescriptions – a noun, a verb, and the most rancid comment underneath a Mail article – came across as a cry for attention. Small wonder that senior figures in Ukip expect Nuttall to face a move on his position, though they also expect that he will see off any attempt to remove him from his crown.

But despite his poor performance, Ukip might not be dead yet. There was a gleam of strategy amid the froth from Nuttall in the party’s pledge to oppose any continuing payment to Brussels as part of the Brexit deal, something that May and Corbyn have yet to rule out.

If May does manage to make it back to Downing Street on 8 June, the gap between campaign rhetoric – we’ll have the best Brexit, France will pay for it – and government policy – we’ll pay a one-off bill and continuing contributions if need be – will be fertile territory for Ukip, if they can survive as a going concern politically and financially, until March 2019.

On tonight’s performance, they’ll need a better centre-forward than Paul Nuttall if they are to make it that far. 

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

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