Don't fall for the Tories' spin over the 45p rate

Why the increase in tax revenues doesn't prove that the coalition was right to scrap the 50p rate.

The Treasury is busy spinning the latest income tax receipt figures as proof that it was right to abolish the 50p rate. Last month the new top rate of 45p raised £11.5bn, £1.3bn more than its predecessor. So, has Art Laffer (of the eponymous "curve") been vindicated? Do lower rates, as the right has long claimed, produce higher revenues? Not quite. The spike in tax receipts is most likely due to the income shifted from last year to this year in order to benefit from the lower rate. As the Institute for Fiscal Studies notes: "Receipts in April will have been boosted by high income individuals shifting income such as bonuses and special dividends from 2012–13 to 2013–14 in anticipation of the fall in the top rate of income tax from 50 per cent to 45 per cent". 

This, of course, is a trick the rich can only play once (unless the rate is reduced again), just as, in the opposite direction, they shifted £16bn into the previous tax year when the rate was still 40p (the real reason that the 50p rate raised less than forecast, although a £1bn isn't to be sniffed at). There was never a "normal" year of the 50p rate. This, of course, was precisely Osborne's intention. Having falsely claimed that the (anomalous) first year of the 50p rate proved that it was ineffective, he will now use the (anomalous) first year of the 45p rate to argue that he was right to scrap it. How much would the 50p rate have raised? We'll never know; Osborne cancelled the experiment at birth. 

The 45p rate may well raise more in the months ahead but we'll have no means of detaching this from any concurrent increase in growth. But don't expect that to stop Osborne declaring victory in the 2014 Budget.

George Osborne arrives to attend a press conference at the conclusion of the IMF UK mission. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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