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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Our union backed Brexit, but that doesn't mean scrapping freedom of movement

We can only improve the lives of our members, like those planning stike action at McDonalds, through solidarity.

The campaign to defend and extend free movement – highlighted by the launch of the Labour Campaign for Free Movement this month – is being seen in some circles as a back door strategy to re-run the EU referendum. If that was truly the case, then I don't think Unions like mine (the BFAWU) would be involved, especially as we campaigned to leave the EU ourselves.

In stark contrast to the rhetoric used by many sections of the Leave campaign, our argument wasn’t driven by fear and paranoia about migrant workers. A good number of the BFAWU’s membership is made up of workers not just from the EU, but from all corners of the world. They make a positive contribution to the industry that we represent. These people make a far larger and important contribution to our society and our communities than the wealthy Brexiteers, who sought to do nothing other than de-humanise them, cheered along by a rabid, right-wing press. 

Those who are calling for end to freedom of movement fail to realise that it’s people, rather than land and borders that makes the world we live in. Division works only in the interest of those that want to hold power, control, influence and wealth. Unfortunately, despite a rich history in terms of where division leads us, a good chunk of the UK population still falls for it. We believe that those who live and work here or in other countries should have their skills recognised and enjoy the same rights as those born in that country, including the democratic right to vote. 

Workers born outside of the UK contribute more than £328 million to the UK economy every day. Our NHS depends on their labour in order to keep it running; the leisure and hospitality industries depend on them in order to function; the food industry (including farming to a degree) is often propped up by their work.

The real architects of our misery and hardship reside in Westminster. It is they who introduced legislation designed to allow bosses to act with impunity and pay poverty wages. The only way we can really improve our lives is not as some would have you believe, by blaming other poor workers from other countries, it is through standing together in solidarity. By organising and combining that we become stronger as our fabulous members are showing through their decision to ballot for strike action in McDonalds.

Our members in McDonalds are both born in the UK and outside the UK, and where the bosses have separated groups of workers by pitting certain nationalities against each other, the workers organised have stood together and fought to win change for all, even organising themed social events to welcome each other in the face of the bosses ‘attempts to create divisions in the workplace.

Our union has held the long term view that we should have a planned economy with an ability to own and control the means of production. Our members saw the EU as a gravy train, working in the interests of wealthy elites and industrial scale tax avoidance. They felt that leaving the EU would give the UK the best opportunity to renationalise our key industries and begin a programme of manufacturing on a scale that would allow us to be self-sufficient and independent while enjoying solid trading relationships with other countries. Obviously, a key component in terms of facilitating this is continued freedom of movement.

Many of our members come from communities that voted to leave the EU. They are a reflection of real life that the movers and shakers in both the Leave and Remain campaigns took for granted. We weren’t surprised by the outcome of the EU referendum; after decades of politicians heaping blame on the EU for everything from the shape of fruit to personal hardship, what else could we possibly expect? However, we cannot allow migrant labour to remain as a political football to give succour to the prejudices of the uninformed. Given the same rights and freedoms as UK citizens, foreign workers have the ability to ensure that the UK actually makes a success of Brexit, one that benefits the many, rather than the few.

Ian Hodon is President of the Bakers and Allied Food Workers Union and founding signatory of the Labour Campaign for Free Movement.