Why Miliband’s tax move is good news for the Lib Dems

The Labour leader's speech has reminded voters of two distinctive and popular Lib Dem policies: increasing the personal allowance and introducing a mansion tax.

Attempting to predict the issues that are likely to feature in a future general election is as foolhardy as it is difficult. However great the plans of those competing, however well honed their message calendars, the one thing we all know for certain is that events come along like storms in the desert and change the political landscape before our eyes.

But we speculate anyway, and occasionally we get it right. Probably the surest prediction we can make about the issues likely to be at play in the 2015 general election is that tax policy will feature heavily. Ed Miliband’s speech yesterday makes that as close to a certainty as possible.
 
The official Liberal Democrat response to Miliband’s speech was dismissive of his overall proposals: the Liberal Democrats in government have reduced the income tax paid by those on the lowest incomes by more in three years than Labour did in thirteen.
 
And the analysis of the speech by the Institute for Fiscal Studies supported the party’s assertion that the Lib Dem policy of raising the threshold at which people begin to pay income tax is a less complex and more effective way of helping the low paid than re-introducing the 10p rate.
 
Yet despite criticising the content, Liberal Democrats will be secretly rather happy with the Labour leader’s speech, for two reasons.
 
First, it shifts the political debate to the area where the Lib Dems are at their strongest: tax policy. For whatever else the party has done in government, it is the implementation of a £10,000 tax-free allowance that is cutting through the fog and being recognised by voters as a distinctive achievement.
 
In the run-up to the next general election, Liberal Democrats will want to talk of little else. Raising the threshold further – to the level of the average earnings of those on the national minimum wage – is already party policy. The party reasons that the combined message of having delivered the £10,000 threshold and seeking to go further in the next parliament is a very strong one indeed.
 
The second reason Liberal Democrats will be pleased with the speech is Miliband’s embrace of a mansion tax. You might think that the party would be annoyed by Labour’s blatant theft of one of its key policies, but actually the reverse is true.
 
The mansion tax is embedded in the minds of the public as a Lib Dem policy. It is unlikely that a random conversion to the merits of the idea will convince voters that if they want a mansion tax they should vote Labour. So by adopting the policy Miliband’s main achievement is to remind voters of the mansion tax, and to increase its importance in the political debate over taxation. Why would Liberal Democrats not welcome such a boost for one of the party’s most distinctive policies?
 
Labour's adoption of the policy also helps when it comes to negotiations in the event of another hung parliament, particularly if (as looks distinctly possible) the arithmetic allows for an arrangement between the Liberal Democrats and either Labour or the Tories. Most party members will not welcome Miliband’s change of heart because it is more likely to lead to a Labour-Lib Dem government. Contrary to popular belief, only a small number of party members would actively prefer that option.
 
Most Liberal Democrats would prefer to enter into an arrangement with whichever party agrees to implement more Lib Dem policies. And just as Labour’s warmer feelings towards electoral reform strengthened the Lib Dem hand in 2010 sufficiently to force the Tories into agreeing a referendum on the alternative vote, so the party’s embrace of a mansion tax makes it more likely that the policy will be implemented if Liberal Democrats end up in government, be it with Labour or the Tories.
 
Whether Miliband’s speech does Labour any good in the long-term remains to be seen, but Liberal Democrats should welcome it: there is every chance it will help Clegg’s party even more.
 
Nick Thornsby is a Liberal Democrat member and activist. His own blog can be found here
Deputy Prime Minister Nick Clegg and Business Secretary Vince Cable during a visit to the Ricardo Engine Assembly plant on September 24, 2012 in Shoreham-by-Sea. Photograph: Getty Images.
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In the row over public sector pay, don't forget that Theresa May is no longer in charge

Downing Street's view on public sector pay is just that – Conservative MPs pull the strings now.

One important detail of Theresa May’s deal with the Democratic Unionist Party went unnoticed – that it was not May, but the Conservatives’ Chief Whip, Gavin Williamson, who signed the accord, alongside his opposite number, the DUP MP Jeffrey Donaldson.

That highlighted two things: firstly that the Conservative Party is already planning for life after May. The deal runs for two years and is bound to the party, not the leadership of Theresa May. The second is that while May is the Prime Minister, it is the Conservative Party that runs the show.

That’s an important thing to remember about today’s confusion about whether or not the government will end the freeze in public sector pay, where raises have been capped at one per cent since 2012 and have effectively been frozen in real terms since the financial crisis.

Michael Fallon, the Defence Secretary, signalled that the government could end the freeze, as did Chris Grayling, the Transport Secretary. (For what it’s worth, Gavin Barwell, now Theresa May’s chief of staff, said before he took up the post that he thought anger at the freeze contributed to the election result.)

In terms of the government’s deficit target, it’s worth remembering that they can very easily meet Philip Hammond’s timetable and increase public sector pay in line with inflation. They have around £30bn worth of extra wriggle room in this year alone, and ending the pay cap would cost about £4.1bn.

So the Conservatives don’t even have to U-turn on their overall target if they want to scrap the pay freeze.

And yet Downing Street has said that the freeze remains in place for the present, while the Treasury is also unenthusiastic about the move. Which in the world before 8 June would have been the end of it.

But the important thing to remember about the government now is effectively the only minister who isn’t unsackable is the Prime Minister. What matters is the mood, firstly of the Cabinet and of the Conservative parliamentary party.

Among Conservative MPs, there are three big areas that, regardless of who is in charge, will have to change. The first is that they will never go into an election again in which teachers and parents are angry and worried about cuts to school funding – in other words, more money for schools. The second is that the relationship with doctors needs to be repaired and reset – in other words, more money for hospitals.

The government can just about do all of those things within Hammond’s more expansive target. And regardless of what Hammond stood up and said last year, what matters a lot more than any Downing Street statement or Treasury feeling is the mood of Conservative MPs. It is they, not May, that pulls the strings now.

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.

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