PMQs review: Cameron's 50p tax problem hasn't gone away

The PM's decision to cut taxes for the highest earners left him vulnerable to Miliband's Reagan-style attack over living standards.

It was Ronald Reagan who Ed Miliband channelled at today's PMQs as he asked his own version of the US President's famous question to Jimmy Carter in the 1980 presidential debate: "Are you better off now than you were four years ago?" 

After today's Resolution Foundation report on "Squeezed Britain" warned that household incomes will not return to pre-recession levels until 2023, Miliband asked David Cameron: "At the end of the parliament, will living standards be higher or lower than they were at the beginning?" 

Understandably reluctant to reply "no", Cameron pointed to the action the coalition had taken to protect living standards, including the rise in the personal allowance and the council tax freeze. But Miliband swiftly countered that the biggest tax cut of all was for those earning over a million pounds a year, who would see their income tax bill fall by more than £100,000 from this April. What made the PM think that those earning £20,000 a week needed "extra help to keep the wolf from the door", he asked.

It was a reminder of why the decision to scrap the 50p rate tax was so politically disastrous for the Tories; it confirmed their status as the party of the rich and overshadowed the Budget's more popular measures. Cameron may contend that the 50p rate was a revenue loser for the Treasury but to most voters that sounds like an argument for cracking down on avoidance, not for cutting taxes. Later asked by Labour MP Stephen Pound whether he would personally benefit from the move, Cameron replied evasively that he would "pay his taxes". Expect Labour to take every opportunity to ask this question before the start of the new tax year on 6 April. 

But Cameron gained the upper hand when he turned his fire on Miliband. Referencing the "major speech" that the Labour leader will give on the economy tomorrow, he mockingly quoted reports that "it won’t have any new policies in it". Jon Cruddas had said that "simply opposing the cuts without an alternative is no good", the PM went on to note. "That is right, the whole frontbench opposite is no good." 

It was punchy stuff but Cameron's decision to cut the 50p rate, combined with the suspicion that he will benefit from the move, means he remains vulnerable on the subject of living standards. With this in mind, Tory MP Robert Halfon has imaginatively called for the reintroduction of the 10p rate, to prove that his party believes in "tax cuts for the many, not just for the few", while simultaneously reminding voters of a Labour error. 

So it was notable that Cameron remarked towards the end of the session, "we won't forget the abolition of the 10p tax rate". Was this is a hint of action to come in the Budget? Almost certainly not (the fiscally conservative Osborne wouldn't allow it), but it would be exactly the kind of "trump card" that Tory MPs have been urging the Chancellor to play. 

David Cameron waits outside Number 10 Downing Street in London on February 11, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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4 ways to end freedom of movement (and try to dodge a hard Brexit)

A lot depends on the details. 

There are few subjects as explosive in Britain today as immigration. Labour is split between those who see anti-immigrant feeling as racism by stealth, and those who consider it a legitimate response to a changing labour market. The Tories, too, are divided between social conservatives worried about culture and communities, and economic liberals who believe everything must be done to preserve the single market.

If David Cameron hadn’t decided to hold an EU referendum, perhaps this debate would have rumbled on before either rolling towards an overwhelming question or being outstripped by events. But he did, and Brexit happened. 

Now, most political realists agree, there will have to be some kind of policy change on immigration. But apart from turning the lights out at border control and bracing ourselves for a hard Brexit, what are the options? Here are some of the ideas on the table:

1. A points-based system

This idea has been bandied around for years, with “points-based system” usually coming straight after “Australian”. The principle is simple enough – aspiring immigrants gain points depending on their education, age, fluency in English and work experience. Of course, the Australian immigration system also involves refusing to let desperate people on boats land, and instead leaving them to rot on islands like Nauru. However, the points-based system is also used in Canada, and *news klaxon* the UK already uses elements of a points-based system for immigration from outside the EU. 

If you’re Theresa May, the main argument against a points-based system is, apparently, that it lets in too many talented immigrants. If you’re the NHS, it can be an obstacle to hiring staff who are desperately needed. And if you’re a Brexit negotiator, since a points-based system effectively eliminates working-class EU immigrants, it is going to make your job very hard indeed.

2. Regional recruitment

In Canada, each province can set their own immigration policy, within certain boundaries, by nominating individuals for permanent residence. So British Columbia is willing to nominate healthcare professionals and post-graduate students who attend a provincial university. The Yukon, a remote province with just one city, nominates entrepreneurs.

But there’s the thing. Canada is the second biggest country in the world, and the population is half that of the UK. Breaking the rules takes effort. Chris Murray, a research fellow at the IPPR, said: “Everyone’s afraid it is a backdoor to London. You say you’re working in Cumbria, and you move straight down to London.”

3. An emergency brake

Back in 2014, the then-Prime Minister David Cameron floated the idea of an “emergency brake” on EU immigration. Under this system, which is based on existing EU law, free movement could continue but the Government would reserve the right to halt it in certain circumstances. As the FT noted: “The rules are supposed to deal with situations such as acts of war or volcanic eruptions, not the movement of fruit pickers from eastern Europe.”

After the volcanic eruption of Brexit, though, the IPPR now thinks an emergency brake could be Britain’s best bet. Murray told The Staggers: “It is quite targeted, and also it is much more likely to get support from European partners.” But remember, Cameron tried to negotiate an emergency brake before. And failed. 

4. Work permits

If you subscribe to the idea Brexit was about wages, and not xenophobia, you might be inclined to support a system of work permits. Under this system, freedom of movement could continue for students, families and retirees, but workers would have to obtain work permits. Home secretary Amber Rudd has said of the idea that it “has value”. 

The problem is, both Britain’s Brexiteers and the EU’s negotiators can count. Hand out work permits to everyone, and immigration levels remain high. Tighten the rules, and that’s the end of freedom of movement. It’s hard to see either side giving the Government such an easy way out.