Will this be the coalition’s poll tax moment?

The 10 per cent cut to Council Tax Benefit will force many to pay the tax for the first time. It could prove the most disastrous of the coalition's welfare reforms.

It is hard to predict which of the coalition’s welfare reforms will prove most politically toxic. The withdrawal of child benefit from those earning over £50,000 could outrage the Tories’ natural supporters, as those families that have not opted out of claiming the benefit discover, to their surprise, that they must now pay a “High Income Child Benefit charge”. Others in the government are more troubled by the introduction later this year of Universal Credit, a new single payment for welfare recipients, reliant on a fearsomely complex computer system that increasingly few in Whitehall believe will work.

But the most hazardous change could be the one that has received the least attention: the government’s reform of the council-tax system. Polls routinely show that the levy is Britain’s most unpopular tax but the coalition is about to ensure that millions of people pay it for the first time. At present, those households deemed too poor to meet the monthly charge receive Council Tax Benefit to cover all or part of their bill. With 5.9 million recipients, it is claimed by more families than any other means-tested benefit or tax credit. Now, in its quest to roll back the welfare state, the coalition has cut the fund for Council Tax Benefit by 10 per cent. At the same time, it has localised the system, transferring responsibility for the new regime from central government to local councils.

From this April, councils must either maintain current levels of support and impose greater cuts elsewhere, remove other exemptions (such as those for second homes and empty properties), or ask those who receive a full or partial rebate at present to make a minimum payment. Early signs suggest that most will opt for the latter. An analysis by the Resolution Foundation and the New Policy Institute found that, of the 86 councils that have published their plans, 57 intend to introduce a minimum payment of between 6 and 30 per cent of a full council-tax bill.

As the government has stipulated that current levels of support must be maintained for pensioners (who, partly owing to their greater propensity to vote, have once again been shielded from austerity), the burden will fall entirely on the working-age poor. On 8 January, Birmingham City Council announced it would impose a 20 per cent charge on the unemployed. That will mean a minimum payment of £200 a year for households affected.

Striking parallel

In the past year, everything from the government’s NHS reforms to its handling of the West Coast Main Line auction has been compared to the poll tax but in this instance the comparison is completely warranted. The parallels with the greatest policy misjudgement by any modern Conservative government are so striking that one is inclined to conclude that the coalition has a death wish. The Community Charge, as it was officially known, similarly required each household, irrespective of its income, to pay at least 20 per cent of the tax. Now, as then, this regressive levy is likely to be met with mass non-payment.

Patrick Jenkin, the architect of the poll tax, has even accused the government of repeating the Thatcher government’s mistake. The Conservative peer told the BBC last year: “The poll tax was introduced with the proposition that everyone should pay something . . .We got it wrong. The same factor will apply here, that there will be large numbers of fairly poor households who have hitherto been protected from Council Tax, who are going to be asked to pay small sums.”

When the poll tax was introduced in 1989, the poor were at least assured that their benefits would rise with prices. But under George Osborne’s plan to uprate working-age benefits by 1 per cent for each of the next three years, rather than in line with inflation, their incomes will be squeezed to an unprecedented degree. The government’s impact assessment showed that the poorest tenth will lose the most in real terms (2 per cent of net income a week), while the next poorest tenth will lose the most in cash terms (£5 a week).

Those faced with the unpalatable choice of either heating their home or feeding their family are unlikely to accept stoically the first council tax bill that lands on their doormat in April. Figures from the Institute for Fiscal Studies show that the average working family will lose £165 per year, while the average non-working family will lose £215.

Confronted by these losses, which household will willingly pay hundreds of pounds in additional tax? Yet, for the sake of saving just £500m a year, the coalition intends to force councils to chase the poorest through the courts to recoup a charge they cannot afford to pay.

Ever since the coalition’s austerity programme began, commentators have asked when its “10p tax moment” will come. In this “son of poll tax”, we may have found the answer.

This piece appears in this week's issue of the New Statesman. To subscribe to the magazine, click here.

A protest in Trafalgar Square in 1990 against the poll tax.

George Eaton is political editor of the New Statesman.

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Everyone's forgotten the one issue that united the Labour party

There was a time when Ed Miliband spoke at Momentum rallies.

To label the row over the EU at Thursday’s Labour leadership hustings "fireworks" would be to endow it with more beauty than it deserves. Owen Smith’s dogged condemnation of John McDonnell’s absence from a Remain rally – only for Corbyn to point out that his absence was for medical reasons – ought to go down as a cringing new low point in the campaign. 

Not so long ago, we were all friends. In the course of the EU referendum, almost all of the protagonists in the current debacle spoke alongside each other and praised one another’s efforts. At a local level, party activists of all stripes joined forces. Two days before polling day, Momentum activists helped organise an impromptu rally. Ed Miliband was the headline speaker, and was cheered on. 

If you take the simple version of the debate, Labour’s schism on the EU appears as an aberration of the usual dynamics of left and right in the party. Labour's left is supposedly cheering a position which avoids advocating what it believes in (Remain), because it would lose votes. Meanwhile, the right claims to be dying in a ditch for its principles - no matter what the consequences for Labour’s support in Leave-voting heartlands.

Smith wants to oppose Brexit, even after the vote, on the basis of using every available procedural mechanism. He would whip MPs against the invocation of Article 50, refuse to implement it in government, and run on a manifesto of staying in the EU. For the die-hard Europhiles on the left – and I count myself among these, having run the Another Europe is Possible campaign during the referendum – there ought to be no contest as to who to support. On a result that is so damaging to people’s lives and so rooted in prejudice, how could we ever accept that there is such a thing as a "final word"? 

And yet, on the basic principles that lie behind a progressive version of EU membership, such as freedom of movement, Smith seems to contradict himself. Right at the outset of the Labour leadership, Smith took to Newsnight to express his view – typical of many politicians moulded in the era of New Labour – that Labour needed to “listen” to the views Leave voters by simply adopting them, regardless of whether or not they were right. There were, he said, “too many” immigrants in some parts of the country. 

Unlike Smith, Corbyn has not made his post-Brexit policy a headline feature of the campaign, and it is less widely understood. But it is clear, via the five "red lines" outlined by John McDonnell at the end of June:

  1. full access to the single market
  2. membership of the European investment bank
  3. access to trading rights for financial services sector
  4. full residency rights for all EU nationals in the UK and all UK nationals in the EU, and
  5. the enshrinement of EU protections for workers. 

Without these five conditions being met, Labour would presumably not support the invocation of Article 50. So if, as seems likely, a Conservative government would never meet these five conditions, would there be any real difference in how a Corbyn leadership would handle the situation? 

The fight over the legacy of the referendum is theatrical at times. The mutual mistrust last week played out on the stage in front of a mass televised audience. Some Corbyn supporters jeered Smith as he made the case for another referendum. Smith accused Corbyn of not even voting for Remain, and wouldn’t let it go. But, deep down, the division is really about a difference of emphasis. 

It speaks to a deeper truth about the future of Britain in Europe. During the referendum, the establishment case for Remain floundered because it refused to make the case that unemployment and declining public services were the result of austerity, not immigrants. Being spearheaded by Conservatives, it couldn’t. It fell to the left to offer the ideological counter attack that was needed – and we failed to reach enough people. 

As a result, what we got was a popular mandate for petty racism and a potentially long-term shift to the right in British politics, endangering a whole raft of workplace and legal protections along the way. Now that it has happened, anyone who really hopes to overcome either Brexit, or the meaning of Brexit, has to address the core attitudes and debates at their root. Then as now, it is only clear left-wing ideas – free from any attempt to triangulate towards anti-migrant sentiment– that can have any hope of success. 

The real dividing lines in Labour are not about the EU. If they were, the Eurosceptic Frank Field would not be backing Smith. For all that it may be convenient to deny it, Europe was once, briefly, the issue that united the Labour Party. One day, the issues at stake in the referendum may do so again – but only if Labour consolidates itself around a strategy for convincing people of ideas, rather than simply reaching for procedural levers.