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.

Getty Images.
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The Lib Dems' troubled start doesn't bode well for them

Rows over homosexuality and anti-Semitism are obscuring the party's anti-Brexit stance.

Tim Farron has broken his silence on the question of whether or not gay sex is a sin. (He doesn't.)

Frankly, this isn't the start to the general election campaign that the Liberal Democrats would have wanted. Time that they hoped would be spent talking about how their man was the only one standing up to Brexit has instead been devoted to what Farron thinks about homosexuality.

Now another row may be opening up, this time about anti-Semitism in the Liberal Democrats after David Ward, the controversial former MP who among other things once wrote that "the Jews" were "within a few years of liberation from the death camps...inflicting atrocities on Palestinians" has been re-selected as their candidate in Bradford East. That action, for many, makes a mockery of Farron's promise that his party would be a "warm home" for the community.

Politically, my hunch is that people will largely vote for the Liberal Democrats at this election because of who they're not: a Conservative party that has moved to the right on social issues and is gleefully implementing Brexit, a riven Labour party led by Jeremy Corbyn, etc. But both rows have hobbled Farron's dream that his party would use this election.

More importantly, they've revealed something about the Liberal Democrats and their ability to cope under fire. There's a fierce debate ongoing about whether or not what Farron's beliefs should matter at all. However you come down on that subject, it's been well-known within the Liberal Democrats that there were questions around not only Farron's beliefs but his habit of going missing for votes concerning homosexuality and abortion. It was even an issue, albeit one not covered overmuch by the press, in the 2015 Liberal Democrat leadership election. The leadership really ought to have worked out a line that would hold long ago, just as David Cameron did in opposition over drugs. (Readers with long memories will remember that Cameron had a much more liberal outlook on drugs policy as an MP than he did after he became Conservative leader.)

It's still my expectation that the Liberal Democrats will have a very good set of local elections. At that point, expect the full force of the Conservative machine and their allies in the press to turn its fire on Farron and his party. We've had an early stress test of the Liberal Democrats' strength under fire. It doesn't bode well for what's to come.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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