Will Balls be forced to use the 50p tax to protect benefits?

Pegging the welfare uprating to the 50p tax rate would be an expensive decision in terms of future policy development.

Ed Balls yesterday gave the clearest indication yet of how Labour intends to handle coalition plans to raise benefits by less than the rate of inflation over the next three years.

George Osborne’s aim to put a Welfare Uprating Bill before parliament next year is plainly meant as a political trap for Labour – forcing them, or so the Chancellor sees it, into unpopular defence of wasteful spending on benefit-dependent layabouts. (The nuances of Osborne’s calculation and the dilemmas it poses for Labour are examined in more detail here, here and here.)

Balls was challenged in parliament to say whether he would support the measure. The nub of his reply was to suggest that Labour would only back the real terms cut to welfare provision on the condition that the top 50p rate of income tax is restored. Specifically he said:

“On the question he asked, we will look at the legislation. But if he intends to go ahead with such an unfair hit on mid- and lower-income working families, while he’s giving a £3 billion top rate tax cut, we will oppose it.”

There is no chance of the 50p tax rate coming back, so in effect Labour is committed to voting against the Welfare Uprating Bill and hoping to reframe the argument around fair contributions from the top of society when those at the bottom – specifically those in work and struggling to get by – are hit hardest.

Much commentary on Labour’s position has focused on the difficulties the party will face winning over voters who are hostile to the idea of benefit “scroungers”.  Balls’s solution indicates that he has his eye on a different dimension to the problem, which is that by opposing Osborne’s move he implicitly makes a spending commitment – and the shadow chancellor is deeply averse to making any of those before he has to.

Balls will be alert to the accusation coming down the line that, whatever Labour says it plans to do about the deficit after 2015, it has already implicitly offered to raise spending on benefits. This can easily be fashioned into an attack along the lines summarised by one shadow cabinet minister as “the £10bn benefits black hole in Labour’s plans”. Not surprisingly, that is a charge Balls is determined to avoid.

Pegging the welfare uprating to the 50p tax rate at least provides some fiscal cover to the Labour position – but it would be an expensive decision in terms of future policy development. It implies a Labour pledge to restore the top rate as soon as the party gets into power and then pre-emptively spends the proceeds, which means the cash isn’t available for anything else. There aren’t that many obvious revenue-raising measures going spare. Balls will not be happy if Osborne forces him to deploy one of them upfront and on benefit spending, more than two years before an election.

Ed Balls said Labour would oppose "an unfair hit on mid and lower income working families". Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

Photo: Getty
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Theresa May is paying the price for mismanaging Boris Johnson

The Foreign Secretary's bruised ego may end up destroying Theresa May. 

And to think that Theresa May scheduled her big speech for this Friday to make sure that Conservative party conference wouldn’t be dominated by the matter of Brexit. Now, thanks to Boris Johnson, it won’t just be her conference, but Labour’s, which is overshadowed by Brexit in general and Tory in-fighting in particular. (One imagines that the Labour leadership will find a way to cope somehow.)

May is paying the price for mismanaging Johnson during her period of political hegemony after she became leader. After he was betrayed by Michael Gove and lacking any particular faction in the parliamentary party, she brought him back from the brink of political death by making him Foreign Secretary, but also used her strength and his weakness to shrink his empire.

The Foreign Office had its responsibility for negotiating Brexit hived off to the newly-created Department for Exiting the European Union (Dexeu) and for navigating post-Brexit trade deals to the Department of International Trade. Johnson was given control of one of the great offices of state, but with no responsibility at all for the greatest foreign policy challenge since the Second World War.

Adding to his discomfort, the new Foreign Secretary was regularly the subject of jokes from the Prime Minister and cabinet colleagues. May likened him to a dog that had to be put down. Philip Hammond quipped about him during his joke-fuelled 2017 Budget. All of which gave Johnson’s allies the impression that Johnson-hunting was a licensed sport as far as Downing Street was concerned. He was then shut out of the election campaign and has continued to be a marginalised figure even as the disappointing election result forced May to involve the wider cabinet in policymaking.

His sense of exclusion from the discussions around May’s Florence speech only added to his sense of isolation. May forgot that if you aren’t going to kill, don’t wound: now, thanks to her lost majority, she can’t afford to put any of the Brexiteers out in the cold, and Johnson is once again where he wants to be: centre-stage. 

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