The welfare cuts that the 50p tax rate could have prevented

George Osborne abolished the top rate of tax after it "only" raised £1bn - but which welfare cuts could have been avoided for that amount?

George Osborne's stated justification for abolishing the 50p income tax rate was that, due to mass avoidance, it raised "just a third of the £3bn" expected. Even by Osborne's standards, this was a peculiarly unconvincing argument. It's true that £16bn of income was shifted into the previous tax year  - when the rate was still 40p - but this was a trick the rich could only have played once. Moreover, as the government has acknowledged in other instances, tax avoidance isn't an argument for cutting tax, it's an argument for limiting avoidance. 

But leave this aside. The fact remains that, as Osborne conceded, the 50p rate raised £1bn (and had the potential to raise far more). Not a transformative amount, to be sure (the deficit is forecast to be £120.9bn this year), but hardly to be sniffed at. Indeed, it's precisely this argument that the government makes when justifying "tough" measures such as the "bedroom tax" (which it is hoped will save £465m a year): every little helps. 

Osborne claims that the reduction in the top rate to 45p will cost the government just £100m but, once again, this is based on an anomalous year's data. Having brought forward their income in order to avoid the 50p rate in its first year, the rich have now delayed it in order to benefit from the reduction to 45p (again, a trick they can only play once) this year. The reality is that the cost of scrapping the rate is likely to be far higher, with up to £3bn in revenue forsaken. But as I show below, even if we accept the anomalous figure of £1bn, a significant number of the welfare cuts introduced by the government could have been avoided if the 50p rate had remained in place. 

The "bedroom tax"

The measure, which will see housing benefit cut by 14 per cent for those social housing tenants deemed to have one spare room and by 25 per cent for those with two or more, is forecast to save £480m - less than half of the yield from the 50p rate. 

It will cost 660,000 tenants an average of £14 a week or £728 a year. Exemptions have been introduced for 5,000 foster carers, some armed forces families and families with severely disabled children - but not families with a severely disabled adult

Estimated saving: £465m a year.

And

Council tax support cut by 10 per cent

The retention of the 50p rate could also have paid for the reversal of the 10 per cent cut in council tax support, which is forecast to save up to £480m a year. The measure will cost 1.9 million families who do not currently pay council tax an average of £140 a year. In addition, 150,000 low income families will pay on average £300 more a year.

I've written about the policy in greater detail here (Will this be the coalition's poll tax moment?).

Estimated saving: £480m a year. 

Or

Legal aid cuts

Alternatively, the 50p rate could have prevented the lowering of the cut-off point for legal aid to a household income of £32,000 and the introduction of a means-test for those earning between £14,000 and £32,000. 

Estimated saving: £350m.

Or

1% cap on benefit increases

Around half of the revenue raised by the 50p rate in its first year could have allowed the government to uprate benefits in line with inflation (which stood at 2.2 per cent in September 2012, the month traditionally used to calculate benefit increases), rather than by just 1 per cent. 

Estimated saving: £505m in 2013-14.

George Osborne scrapped the 50p tax rate in his 2012 Budget after it raised "just a third of the £3bn" expected. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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How Tony Blair's disingenuous line on Iraq eroded our faith in politicians

Not the Chilcot Report by Peter Oborne reveals how Blair exagerrated evidence from the intelligence services to parliament – and the public.

In this incisive book, Peter Oborne calls the invasion of Iraq “the defining calamity of the post-Cold War era” and I am inclined to agree. Not long after the March 2003 attack, I interviewed Adnan Pachachi, a former foreign minister and UN ambassador for Iraq. He told me that he had visited President George W Bush in Washington a few weeks before the invasion and begged him not to go ahead with it. The overthrow of Saddam Hussein would, Pachachi warned, lead inevitably to civil war between Iraq’s two main religious groupings, the Sunnis and the Shias. Bush was shocked. According to Pachachi, he had no idea that any such division among Muslims existed.

Granted, Bush was an ignoramus – but you would have thought that someone might have explained this crucial fact to him. Pachachi turned out to be right. Iraq has fallen into a disastrous religious civil war as a direct result of the invasion and Isis, a more extreme force even than al-Qaeda, has come to the fore. Nearly 5,000 coalition soldiers died; many hundreds of thousands of Iraqi civilians, perhaps a million, have lost their lives; and the man who led the whole terrible business didn’t know that the danger even existed.

Pachachi, like many politicians across the Middle East, found this puzzling. The US had never understood the Middle East, he said, but the British did; so why hadn’t Tony Blair warned the Americans what was going to happen? We know the answer to that: although Blair was far cleverer than Bush and had better advisers, his approach was always a subservient one. Like the entire British establishment, he believed that Britain’s influence in the world depended on sticking close to the US and he was prepared to be led around on a leash because he knew that this was the only relationship Bush’s people understood or wanted from him.

To “stand shoulder to shoulder” with Bush – at least, to stand closer behind him, head bowed, than any other national leader – Blair had to persuade the British people that Saddam posed a threat to them. Oborne, in fine forensic form, demolishes (his word) the notion that Blair was simply repeating what the intelligence services had told him about Saddam’s weapons and capability; he shows that Blair exaggerated and misrepresented the intelligence he was given.

Lord Butler, the former cabinet secretary who had investigated the government’s pre-invasion use of intelligence, said the same thing in a speech in the House of Lords in 2007. He described Blair’s approach as “disingenuous”: mandarin-speak for dishonest. Oborne quotes Butler at length:

 

The United Kingdom intelligence community told him [Blair] on 23 August 2002 that, “We . . . know little about Iraq’s chemical and biological weapons work since late 1988.” The prime minister did not tell us that. Indeed, he told parliament only just over a month later that the picture painted by our intelligence services was “extensive, detailed and authoritative”.

 

Oborne’s central point is that this dishonesty has done serious damage to the fundamental trust that the British people used to have in their rulers. There are all sorts of reasons why people have lost faith in politicians but it was the charismatic Blair – along with his head of communications, Alastair Campbell – who let us down the most.

Campbell is a former journalist who, even when he was the political editor of the Daily Mirror, seemed far more concerned with pushing a party line than with trying to report things truthfully. In May 2003, the BBC journalist Andrew Gilligan accused him of “sexing up” the dossier on Saddam’s weapons of mass destruction. Campbell was irate. In July, Dr David Kelly, the Ministry of Defence weapons expert who had briefed Gilligan, committed suicide. If, indeed, it was suicide – once you start losing faith in the ­official version of things, there is no end to it. And that is Oborne’s point.

Kelly’s death was followed by the scandalous Hutton inquiry, which managed to deflect attention from the questionable nature of the dossier to the way in which Gilligan had reported on it. However, although Kelly wasn’t a sufficiently senior source for Gilligan to base his report on, there is no doubt that Gilligan was essentially right: the intelligence dossier had been grossly hyped up. Campbell’s frenzied efforts to protect himself and Blair did huge damage to the BBC, the judiciary, the intelligence and security agencies and public trust in government.

Oborne’s excellent book is clear-headed and furious in its condemnation of Blair. But what about the Chilcot report, when it appears on 6 July? The ludicrous delay in publishing it has given people the expectation that it, too, will be a whitewash. Yet we are starting to get leaks that it won’t be – that it will be just as savage as Oborne would like. That is the only way we can start to drain the poison that has built up in our national life since Blair took the calamitous decision to follow the US into invading a country that its president knew zip about.

John Simpson (@JohnSimpsonNews) is the world affairs editor of the BBC

Not the Chilcot Report by Peter Oborne is published by Head of Zeus (208pp, £10)

John Simpson is World Affairs Editor of BBC News, having worked for the corporation since the beginning of his career in 1970. He has reported from more than 120 countries, including 30 war zones, and interviewed many world leaders.

This article first appeared in the 26 May 2016 issue of the New Statesman, The Brexit odd squad