The 50p tax rate is an essential part of a fair deficit reduction plan

At a time when the incomes of ordinary families are falling, the highest earners must contribute more to reduce government borrowing.

Labour’s campaign on the cost-of-living-crisis has clearly struck a chord. People know that – whatever the Treasury may claim – it has been getting harder to cover all their costs as prices rise and wages fall. Raising living standards for the long-term will be a huge challenge, particularly at a time when getting the deficit down means that there is very little money around. But with the right mix of policies I believe that we can do it.

Paying down the deficit is a necessary part of that mix. The Tories’ failure to balance the books in this Parliament, as they had promised, means that a Labour government will have to finish the job. Ed Balls’ commitment that Labour will get the current budget into surplus as soon as possible, and get the nation’s debt falling in the next Parliament, gives a firm foundation for the long-term reform we need.

And that deficit reduction must be done in a fair way. At a time when the incomes of ordinary families are falling, the priority should not be tax cuts for the highest earners, but help for those on middle and low incomes. The Tories were wrong to cut taxes for the top one per cent and we now know that over the three years that the 50p tax rate was in place, those with incomes of £150,000 and above paid nearly £10bn more in tax than thought when George Osborne chose to cut it. Restoring the 50p rate will ensure that everyone is making a fair contribution to paying down the deficit.

But while getting down the deficit is necessary, it is not sufficient. We also need to take some long-term – and difficult – decisions to change the way our economy works. Only then will we raise productivity and living standards. This is at the heart of my review into how we sustainably grow the economy. My work has taken me up and down the country and I’ve been struck by the creative energy which can drive our economy if only we can tap into it.

How can we do that? Devolving the right economic powers to our cities and regions will be key. They are best placed to make long-term decisions based on the potential of their area. Providing the right funding networks for small but growing businesses is also vital. This is partly about reforming our banking system so that it is competitive and focused on the needs of the businesses they serve, and it is also about finding innovative ways of linking those with the money to those with the ideas. Underpinning it all we need an infrastructure system which is modern and focused on long-term growth.

None of this is easy. Getting the deficit down will be tough. Devolving decision making and investing in infrastructure will at times be unpopular. But I believe that with a fair deficit reduction plan and long-term economic reforms we can raise living standards for all.

Andrew Adonis is shadow infrastructure minister and is leading Labour's growth review

The highest earners "paid nearly £10bn more in tax than thought when George Osborne chose to cut it". Photograph: Getty Images.
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By refusing to stand down, Jeremy Corbyn has betrayed the British working classes

The most successful Labour politicians of the last decades brought to politics not only a burning desire to improve the lot of the working classes but also an understanding of how free market economies work.

Jeremy Corbyn has defended his refusal to resign the leadership of the Labour Party on the grounds that to do so would be betraying all his supporters in the country at large. But by staying on as leader of the party and hence dooming it to heavy defeat in the next general election he would be betraying the interests of the working classes this country. More years of Tory rule means more years of austerity, further cuts in public services, and perpetuation of the gross inequality of incomes. The former Chief Secretary to the Treasury, Seema Malhotra, made the same point when she told Newsnight that “We have an unelectable leader, and if we lose elections then the price of our failure is paid by the working people of this country and their families who do not have a government to stand up for them.”

Of course, in different ways, many leading figures in the Labour movement, particularly in the trade unions, have betrayed the interests of the working classes for several decades. For example, in contrast with their union counterparts in the Scandinavian countries who pressurised governments to help move workers out of declining industries into expanding sectors of the economy, many British trade union leaders adopted the opposite policy. More generally, the trade unions have played a big part in the election of Labour party leaders, like Corbyn, who were unlikely to win a parliamentary election, thereby perpetuating the rule of Tory governments dedicated to promoting the interests of the richer sections of society.

And worse still, even in opposition Corbyn failed to protect the interests of the working classes. He did this by his abysmal failure to understand the significance of Tory economic policies. For example, when the Chancellor of the Exchequer had finished presenting the last budget, in which taxes were reduced for the rich at the expense of public services that benefit everybody, especially the poor, the best John McConnell could do – presumably in agreement with Corbyn – was to stand up and mock the Chancellor for having failed to fulfill his party’s old promise to balance the budget by this year! Obviously neither he nor Corbyn understood that had the government done so the effects on working class standards of living would have been even worse. Neither of them seems to have learnt that the object of fiscal policy is to balance the economy, not the budget.

Instead, they have gone along with Tory myth about the importance of not leaving future generations with the burden of debt. They have never asked “To whom would future generations owe this debt?” To their dead ancestors? To Martians? When Cameron and his accomplices banged on about how important it was to cut public expenditures because the average household in Britain owed about £3,000, they never pointed out that this meant that the average household in Britain was a creditor to the tune of about the same amount (after allowing for net overseas lending). Instead they went along with all this balanced budget nonsense. They did not understand that balancing the budget was just the excuse needed to justify the prime objective of the Tory Party, namely to reduce public expenditures in order to be able to reduce taxes on the rich. For Corbyn and his allies to go along with an overriding objective of balancing the budget is breathtaking economic illiteracy. And the working classes have paid the price.

One left-wing member of the panel on Question Time last week complained that the interests of the working classes were ignored by “the elite”. But it is members of the elite who have been most successful in promoting the interests of the working classes. The most successful pro-working class governments since the war have all been led mainly by politicians who would be castigated for being part of the elite, such as Clement Atlee, Harold Wilson, Tony Crosland, Barbara Castle, Richard Crossman, Roy Jenkins, Denis Healey, Tony Blair, and many others too numerous to list. They brought to politics not only a burning desire to improve the lot of the working classes (from which some of them, like me, had emerged) and reduce inequality in society but also an understanding of how free market economies work and how to deal with its deficiencies. This happens to be more effective than ignorant rhetoric that can only stroke the egos and satisfy the vanity of demagogues

People of stature like those I have singled out above seem to be much more rare in politics these days. But there is surely no need to go to other extreme and persist with leaders like Jeremy Corbyn, a certain election loser, however pure his motives and principled his ambitions.

Wilfred Beckerman is an Emeritus Fellow of Balliol College, Oxford, and was, for several years in the 1970s, the economics correspondent for the New Statesman