Tory MPs divided over tax cuts after Miliband's 10p tax pledge

Conservative MP Graham Brady demands the abolition of Air Passenger Duty but Robert Halfon tells the New Statesman it would be the wrong move.

After Ed Miliband's audacious pledge to reintroduce the 10p tax rate, funded by a mansion tax on houses worth more than £2m, George Osborne is under even greater pressure from Conservative MPs to play a "trump card" when he delivers the Budget on 20 March. There's frustration among the Tories that the 10p tax rate, a measure championed by a Conservative MP, Robert Halfon, was taken up by Labour before Halfon's own party. If he wants to avoid a backlash, the Chancellor now has no choice but to announce significant tax cuts when he steps up to the despatch box next month. 

In an article for today's Daily Telegraph, Graham Brady (profiled by Caroline earlier this year), the chairman of the powerful 1922 Committee of backbench Tory MPs, wastes no time in setting out hs Budget wishlist. While praising the Chancellor's cuts to corporation tax (which has been reduced from 28 per cent to 23 per cent and will fall again to 21 per cent next year), he urges him to "go further". 

Brady's principal demand is for Osborne to abolish Air Passenger Duty - "the highest aviation tax in the world" - which the Chancellor increased by eight per cent in last year's Budget. He points to a study by PricewaterhouseCoopers which found that scrapping the tax would deliver an immediate economic boost of 0.5 per cent of GDP. This, Brady pointedly notes, is "not to be sneezed at in these days of anaemic growth." 

But when I spoke to Robert Halfon earlier this week (undoubtedly now the most influential backbench MP), he told me that cutting Air Passenger Duty would be the wrong move. "In times like this, flying is a luxury, it's not something you have to do" he said. "It's [reducing Air Passenger Duty] not the best way to help low-earners".

Having criticised Labour's 10p tax proposal on the grounds that it would only mean an extra £34 a year for a family (once benefit withdrawal is taken into account), Halfon is still pushing for Osborne to adopt his policy in full: a reintroduced 10p rate on earnings between £9,440 and £12,000 (Miliband's proposal would only apply to the first £1,000 of earnings over the personal allowance).

But with Osborne having unambiguously ruled out the introduction of a "mansion tax" ("this party of home ownership will have no truck with it," he said in his Conservative conference speech), the question remains how the Chancellor would pay for a 10p rate. Halfon has proposed funding the measure by  ring-fencing the extra revenue from the 45p rate (on the assumption that a lower top rate of tax will benefit growth). But with growth likely to remain anaemic or non-existent, Osborne will have little room for manoeuvre, not least because he has already promised to raise the personal allowance to £10,000 by the end of this parliament. Whether or not Tory MPs secure the tax cuts they wish to see may yet depend on whether the Chancellor, a fiscal conservative to his core, is finally willing to tolerate a higher deficit. 

George Osborne is under pressure to deliver tax cuts in the Budget after Ed Miliband pledged to reintroduce the 10p income tax rate. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Chuka Umunna speaks at the launch of Labour's education manifesto during the general election. Photograph: Getty Images.
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After so badly misjudging the leadership contest, how will the Blairites handle Corbyn?

The left-winger's opponents are divided between conciliation and aggression. 

When Labour lost the general election in May, the party’s modernisers sensed an opportunity. Ed Miliband, one of the most left-wing members of the shadow cabinet, had been unambiguously rejected and the Tories had achieved their first majority in 23 years. More than any other section of the party, the Blairites could claim to have foreseen such an outcome. Surely the pendulum would swing their way?

Yet now, as Labour’s leadership contest reaches its denouement, those on the right are asking themselves how they misjudged the landscape so badly. Their chosen candidate, Liz Kendall, is expected to finish a poor fourth and the party is poised to elect Jeremy Corbyn, the most left-wing leader in its 115-year history. For a faction that never ceases to underline the importance of winning elections, it will be a humbling result.

Though the crash has been sudden, the Blairites have long been in decline. Gordon Brown won the leadership unchallenged and senior figures such as John Reid, James Purnell and Alan Milburn chose to depart from the stage rather than fight on. In 2010, David Miliband, the front-runner in the leadership election, lost to his brother after stubbornly refusing to distance himself from the Iraq war and alienating undecided MPs with his imperiousness.

When the younger Miliband lost, the modernisers moved fast – too fast. “They’re behaving like family members taking jewellery off a corpse,” a rival campaign source told me on 9 May. Many Labour supporters agreed. The rush of op-eds and media interviews antagonised a membership that wanted to grieve in peace. The modernising contenders – Chuka Umunna, Liz Kendall, Mary Creagh, Tristram Hunt – gave the impression that the Blairites wanted to drown out all other voices. “It was a huge mistake for so many players from that wing of the party to be put into the field,” a shadow cabinet minister told me. “In 1994, forces from the soft left to the modernising right united around Tony Blair. The lesson is never again can we have multiple candidates.”

While conducting their post-mortem, the Blairites are grappling with the question of how to handle Corbyn. For some, the answer is simple. “There shouldn’t be an accommodation with Corbyn,” John McTernan, Blair’s former director of political operations, told me. “Corbyn is a disaster and he should be allowed to be his own disaster.” But most now adopt a more conciliatory tone. John Woodcock, the chair of Progress, told me: “If he wins, he will be the democratically elected leader and I don’t think there will be any serious attempt to actually depose him or to make it impossible for him to lead.”

Umunna, who earlier rebuked his party for “behaving like a petulant child”, has emphasised that MPs “must accept the result of our contest when it comes and support our new leader in developing an agenda that can return Labour to office”. The shadow business secretary even suggests that he would be prepared to discuss serving in Corbyn’s shadow cabinet if he changed his stances on issues such as nuclear disarmament, Nato, the EU and taxation. Were Umunna, a former leadership contender, to adopt a policy of aggression, he would risk being blamed should Corbyn fail.

Suggestions that the new parliamentary group Labour for the Common Good represents “the resistance” are therefore derided by those close to it. The organisation, which was launched by Umunna and Hunt before Corbyn’s surge, is aimed instead at ensuring the intellectual renewal that modernisers acknowledge has been absent since 2007. It will also try to unite the party’s disparate mainstream factions: the Blairites, the Brownites, the soft left, the old right and Blue Labour. The ascent of Corbyn, who has the declared support of just 15 MPs (6.5 per cent of the party), has persuaded many that they cannot afford the narcissism of small differences. “We need to start working together and not knocking lumps out of each other,” Woodcock says. There will be no defections, no SDP Mk II. “Jeremy’s supporters really underestimate how Labour to the core the modernisers are,” Pat McFadden, the shadow Europe minister, told me.

Although they will not change their party, the Blairites are also not prepared to change their views. “Those of us on this side of Labour are always accused of being willing to sell out for power,” a senior moderniser told me. “Well, we do have political principles and they’re not up for bartering.” He continued: “Jeremy Corbyn is not a moderate . . .
He’s an unreconstructed Bennite who regards the British army as morally equivalent to the IRA. I’m not working with that.”

Most MPs believe that Corbyn will fail but they are divided on when. McFadden has predicted that the left-winger “may even get a poll bounce in the short term, because he’s new and thinking differently”. A member of the shadow cabinet suggested that Labour could eventually fall to as low as 15 per cent in the polls and lose hundreds of councillors.

The challenge for the Blairites is to reboot themselves in time to appear to be an attractive alternative if and when Corbyn falters. Some draw hope from the performance of Tessa Jowell, who they still believe will win the London mayoral selection. “I’ve spoken to people who are voting enthusiastically both for Jeremy and for Tessa,” Wes Streeting, the newly elected MP for Ilford North, said. “They have both run very optimistic, hopeful, positive campaigns.”

But if Corbyn falls, it does not follow that the modernisers will rise. “The question is: how do we stop it happening again if he does go?” a senior frontbencher said. “He’s got no interest or incentive to change the voting method. We could lose nurse and end up with something worse.” If the road back to power is long for Labour, it is longest of all for the Blairites. 

George Eaton is political editor of the New Statesman.

This article first appeared in the 03 September 2015 issue of the New Statesman, Pope of the masses