What Cameron and Clegg could learn from Churchill and Lloyd George

The People's Budget of 1909 introduced an array of unprecedented measures to tackle poverty and inequality. Its stated ambition was to be "a great step towards that good time, when poverty, and the wretchedness and human degradation which always follows in its camp, will be as remote to the people of this country as the wolves which once infested its forests". Among the radical policy measures harnessed to achieve this ambitious goal were a land tax and an increase to inheritance tax. The People's Budget had its most staunch champions in David Lloyd George and Churchill, known to their contemporaries as the "Terrible Twins".

The Budget to be proposed this Wednesday by the government under the leadership of David Cameron and Nick Clegg is not going to have comparable ambitions. The series of vitriolic attacks on the idea of a "mansion tax" is a good indicator that taxes on wealth would not meet with much enthusiasm in Westminster in the current climate. However, while remaining fiscally "neutral", this Budget is likely to have far reaching ideological repercussions. The two central proposals of the coalition partners: the Tory abolition of the 50p rate of income tax and the Lib Dem move towards the £10,000 income tax threshold -- if implemented -- have the potential to drive a wedge between the rich and the poor.

First, take the Tory idea of scrapping the 50p rate. The debate over the fiscal benefit of keeping the 50 per cent tax rate continues; politically, the die has been cast. This move is controversial -- as the Guardian/ICM poll reveals -- two thirds of voters are in favour of maintaining the 50p tax rate. Indeed, in terms of people's perceptions of fairness, it is relatively easy to see why lowering the income tax for the richest 1 per cent of earners who get at least 6 times the national median income, might be seen as exacerbating social inequalities. It might not be equally obvious why this should be the case with a policy once considered to be "political gold": the Lib Dem proposal to raise the level at which people start paying income tax to £10,000.

Scrutiny reveals that not all that glitters is gold. The Institute for Fiscal Studies recently showed that the £10,000 threshold for income tax is likely to benefit the richest households most, while leaving intact the plight of those who earn so very little that they don't even qualify to pay income tax. Even more problematically, it is also feared that this move could make a number of middle-income families lose child benefit and exacerbate the already dire financial situation of the "squeezed middle-class". What is particularly interesting in the context of this argument concerned with the impact of the Budget measures on the levels of inequality and the perception of fairness is that the proposal to lift a group of people beyond income tax will result in the stigmatisation of the poor as "undeserving".

There would be a big difference, on this proposal, between anyone earning £10,000 or less, who would pay no income tax at all, and those on middle incomes, who would get the first £10,000 they earn tax free. As Clegg himself observed once, the latter belong to a group of people "whose incomes are too high to qualify for welfare benefits, but too low to provide any real financial security". They are the "ordinary, hardworking people"; and they would be likely to hold in deep contempt those exempt from paying income tax altogether, and yet eligible to receive benefits -- that is, ordinary, often hardworking, but, in the opinion of middle Britain, "undeserving" people.

The reason is plain. The success of William Beveridge's legacy rests on the ideas, first, of linking together the notions of citizenship and welfare and, second, of using taxation as a bridge between citizens and the state. Contribution and entitlement are inexorably bound together, in the same way that citizens are bound to the state through taxation. What is at stake here is the sense of collective responsibility and identity. The proposal to exempt a group of people from their contractual obligation with the state is likely to have far reaching consequences for how these people are perceived by the rest of society. Lifting them out of the income tax net will result in a politics of us and them -- we are not all in it together since only some of us pay, since only some of us receive benefits. There is a better way of helping those who desperately need it: make them less poor by enforcing the living wage regulation, and make them more "deserving" by allowing them to exercise their citizenship responsibilities and requiring them to pay a very low marginal taxation rate on the first £10,000.

In the lead up to Budget day, the government of a nation eviscerated by inequalities -- where 40 per cent of all the wealth is owned by 5 per cent of the population and 70 per cent of approximately 60 million acres of land owned by less than 1 per cent of the population -- should not exacerbate the perception of unfairness. Needless to say, the most effective way of tackling these perceptions would be to change the reality. In order to tackle inequality in a serious way, the coalition government need a set of policies as radical as those introduced in 1909 by the government under Lloyd George and Winston Churchill when they put forward a proposal for a land value tax. Of course, the Terrible Twins' Bill was never implemented; it was opposed by the House of Lords as "a menace to property and a Socialistic spirit". Yet, for a short time it carried the promise of a Budget truly preoccupied with fighting inequalities. Sadly, if all goes according to plan and the two main ideas of the current coalition partners are implemented -- unlike the People's Budget of 1909 -- the 2012 Budget is likely to be commemorated as the Budget of Two Nations "between whom there is no intercourse and no sympathy [...] as if they were dwellers in different zones, or inhabitants of different planets: the rich and the poor."

Patricia Kaszynska is senior researcher and project manager at ResPublica

 

A year on from the Spending Review, the coalition's soothsayer has emerged to offer another gloomy economic prognosis. Asked by ITV News whether he could promise that there wouldn't be a double-dip recession, Vince Cable replied: "I can't do that.

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Benn vs McDonnell: how Brexit has exposed the fight over Labour's party machine

In the wake of Brexit, should Labour MPs listen more closely to voters, or their own party members?

Two Labour MPs on primetime TV. Two prominent politicians ruling themselves out of a Labour leadership contest. But that was as far as the similarity went.

Hilary Benn was speaking hours after he resigned - or was sacked - from the Shadow Cabinet. He described Jeremy Corbyn as a "good and decent man" but not a leader.

Framing his overnight removal as a matter of conscience, Benn told the BBC's Andrew Marr: "I no longer have confidence in him [Corbyn] and I think the right thing to do would be for him to take that decision."

In Benn's view, diehard leftie pin ups do not go down well in the real world, or on the ballot papers of middle England. 

But while Benn may be drawing on a New Labour truism, this in turn rests on the assumption that voters matter more than the party members when it comes to winning elections.

That assumption was contested moments later by Shadow Chancellor John McDonnell.

Dismissive of the personal appeal of Shadow Cabinet ministers - "we can replace them" - McDonnell's message was that Labour under Corbyn had rejuvenated its electoral machine.

Pointing to success in by-elections and the London mayoral election, McDonnell warned would-be rebels: "Who is sovereign in our party? The people who are soverign are the party members. 

"I'm saying respect the party members. And in that way we can hold together and win the next election."

Indeed, nearly a year on from Corbyn's surprise election to the Labour leadership, it is worth remembering he captured nearly 60% of the 400,000 votes cast. Momentum, the grassroots organisation formed in the wake of his success, now has more than 50 branches around the country.

Come the next election, it will be these grassroots members who will knock on doors, hand out leaflets and perhaps even threaten to deselect MPs.

The question for wavering Labour MPs will be whether what they trust more - their own connection with voters, or this potentially unbiddable party machine.