The EU referendum leaflet that embarrassed Clegg

Lib Dem leader struggles to explain away election leaflet that called for a "real referendum" on EU membership.

Nick Clegg had a rough ride on the Today programme this morning after presenter Justin Webb reminded him of a Liberal Democrat election leaflet calling for an in/out referendum on the EU. Clegg is now oppposed to a vote on EU membership but not long ago he was calling for a "real referendum" and attacking Labour and the Tories for not doing the same.

The leaflet in question declared:

It's been over thirty years since the British people last had a vote on Britain's membership of the European Union.

That's why the Liberal Democrats want a real referendum on Europe. Only a real referendum on Britain's membership of the EU will let the people decide our country's future.

But Labour don't want the people to have their say.

The Conservatives only support a limited referendum on the Lisbon Treaty. Why won't they give the people a say in a real referendum?

Asked why he no longer supported an early referendum, a tetchy Clegg pointed out that his party's election manifesto stated that an in/out referendum should only be held "the next time a British government signs up for fundamental change in the relationship between the UK and the EU."

But as you'll have seen, the leaflet was less specific, simply calling for a "real referendum" and not tying this pledge to a treaty change. Indeed, it criticised the Tories for only supporting "a limited referendum on the Lisbon Treaty."

As in the case of tuition fees, it's another example of a populist campaign promise that Clegg couldn't live up to. Whether eurosceptic or europhile, British voters are likely to agree on one thing: you can't trust the Lib Dems.

The leaflet row aside, most of the interview was devoted to Clegg denouncing those who argue that Britain should seek to repatriate powers from the EU. "I don't agree with the premise that we can on our own, unilaterally, simply rewrite the terms of the membership of this European club," he said. He went on to warn that the uncertainty created by a referendum pledge could have a "chilling effect on growth and jobs". Rather than vowing to bring back powers from Brussels, Clegg suggested that the government should wait to see whether a new treaty emerges and whether it impacts on Britain (something that would trigger a public vote under the coalition's "referendum lock").

Intriguingly, however, he suggested that the distance between himself and David Cameron was smaller than thought because Cameron's plan to renegotiate British membership was linked to a future treaty change. Thus, if there is no treaty change (as may well prove to be the case), there will be no renegotiation and no repatriation of powers. This is a point that Tory MPs will want reassurance on when Cameron delivers his speech on Friday.

Nick Clegg at the EU headquarters in Brussels. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Taxation without benefits: how our tax system increases inequality

We often hear the progressive income tax used as a proxy for all tax when it actually accounts for just over a quarter of the tax take.

Tax may not be the burning issue on everyone’s minds over the next month, but the Panama Papers leak has proven that the thorny issues of who pays what, and what level of tax is fair, are ones that are never too far away from the public consciousness.

One of the most important annual publications on tax is the Office for National Statistics’ Effects of Taxes and Benefits on Household Income. Published today, it shows, among other things, the proportion of income paid in tax by people at different points on the income spectrum. This may sound like the natural domain of the data nerd, but it actually tells us some rather interesting facts about our system of taxes and benefits.

First, the good news. Our much maligned welfare system is in fact a beacon of progressiveness, drastically reducing the level of income inequality we see in this country. In fact, overall, taxes and benefits are quite substantially redistributive. Without them, the income of the richest 20 per cent of households would be 14 times higher than the poorest 20 per cent. With them, that gap falls to only four times.

The benefit system as a whole decreases the Gini coefficient, the most frequently used measure of inequality, by 14 percentage points. For anyone who sees taxes and benefits as a key component in reducing economic inequality, or boosting the incomes of the poorest, or, frankly, tackling social injustice, this is rather welcome news.

But now for the bad news.

While our welfare system is undoubtedly progressive, the same cannot be said of our tax system when looked at in isolation. The poorest face a disproportionately heavy tax burden compared to the richest, paying 47 per cent of their income in tax, compared to just 34 per cent for the richest. Last year (2013/14) this difference was 45 per cent – 35 per cent, and the year before (2012/13) the gap was 43 per cent – 35 per cent. So while the proportion of income paid in tax has fallen slightly for the richest, it has increased for the poorest.

While some taxes like income tax are substantially progressive, those such as VAT and Council Tax are not. Even after adjusting for rebates and Council Tax Benefit, the poorest 10 per cent pay 7.1 per cent of their income in council tax while the richest 10 per cent pay only 1.5 per cent.

Should this matter, if our system of benefits continues to narrow the gap between rich and poor? Well, yes, not least because that system is under severe pressure from further cuts. But there are other good reasons to focus on the tax system in isolation from the benefit system.

Polling by Ipsos MORI has shown that the public believes that the tax system by itself reduces inequality, and it is often spoken of by politicians as if that is the case. We often hear the progressive income tax used as a proxy for all tax, for example, when it actually accounts for just over a quarter of the tax take.

Understanding why the tax system does not by itself reduce inequality is therefore important for both thinking about how tax revenues could be better raised, and for understanding the importance of the benefit system in narrowing the gap between the richest and the poorest.

John Hood is Acting Director of the Equality Trust