Cameron hands Labour an attack line by hinting the 45p tax rate could be cut

The PM's loose talk on tax has distracted from his popular pledge to maintain the triple lock on the state pension.

David Cameron has started 2014 with his biggest spending pledge to date: to maintain the triple lock on the state pension for the entirety of the next parliament. This means that pensions will continue to rise in line with inflation, earnings, or 2.5%, whichever is highest. He tells the Sunday Times: "This is the first plank of the next general election manifesto. Pensions are protected. I think that is really important. In a civilised society ... knowing you’re going to have a decent state pension ... is, I think, a really powerful thing."

This is undoubtedly smart politics. Pensioners are the most likely age group to vote (76 per cent did in 2010 compared to 65 per cent of the total population) and the Tories have become the first party to pledge to maintain the triple lock beyond 2015. But Cameron's promise is competing for attention this morning with his suggestion that the top rate of tax, which was reduced from 50p to 45p last year, could be cut again. He comments: "It just seemed to me that if your top rate of tax is not raising the money that it should, and it’s holding back the competitiveness of the economy, then even if it’s politically unpopular to change it, you must do it. I’m trying to sweep away all the things that hold back the chance of Britain being a real success story in the 21st century. And you know, having a top rate of tax of 50p is just going to hold Britain back. And what we’ve seen since the change is actually the growth of tax revenues."

And adds: "I’m always interested in listening to the experts. Tax rates should be set to raise money, not to send messages. I’m interested in making sure that the rich in this country pay a lot of tax, which they do. They’re paying a bigger share ... than they were. If people can bring forward arguments about how to maximise the revenue from the top rate of tax, I’m always interested to read them."

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 recent spike in tax receipts was most likely due to the income shifted from 2012 to 2013 in order to benefit from the lower rate. As the IFS noted: "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 reason the 50p rate raised less than forecast, although £1bn is hardly a trivial sum). Cameron should also avoid confusing correlation with cause. If revenues rise this year, it will likely owe more to the return of growth than lower taxes.

But regardless of the policy implications, Cameron's hint that the rate could be cut again ("If people can bring forward arguments...I'm always interested to read them") is terrible politics. Every poll published on the subject has shown that the public opposed the decision to reduce the 50p rate (one put support for the higher rate at 68%), while 48% favour a 60p rate. By suggesting, nevertheless, that the highest earners could be awarded another tax cut, Cameron has gifted Labour an attack line. Shadow chief secretary to the Treasury Chris Leslie wasted no time in declaring that "While ordinary families are facing a cost-of-living crisis it seems David Cameron wants to give people earning over £150,000 yet another tax cut. Working people are on average £1,600 a year worse off since the Tories came to office. But once again this Prime Minister seems determined to be on the side of the privileged few."

This should have been a good news day for the Tories, with Cameron promising continued increases in the state pension for all pensioners (not just some). But the PM's loose talk on tax has allowed Labour to once again portray him as being on the side of the few, not the many.

Update: Cameron tried to recover some ground on The Andrew Marr Show by saying that if he had "money in the coffers", he would target tax cuts at "the lowest paid", but he still refused to rule out cutting the 45p rate. If he wants to avoid allowing Labour to claim that he's planning another "millionaire's tax cut" throughout the election campaign, he would be wise to do so.

David Cameron gives a press conference after an EU summit in Brussels on December 20, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Theresa May could live to regret not putting Article 50 to a vote sooner

Today's Morning Call.

Theresa May will reveal her plan to Parliament, Downing Street has confirmed. They will seek to amend Labour's motion on Article 50 adding a note of support for the principle of triggering Article 50 by March 2017, in a bid to flush out the diehard Remainers.

Has the PM retreated under heavy fire or pulled off a clever gambit to take the wind out of Labour's sails while keeping her Brexit deal close to her chest? 

Well, as ever, you pays your money and you makes your choice. "May forced to reveal Brexit plan to head off Tory revolt" is the Guardian's splash. "PM caves in on plans for Brexit" is the i's take. "May goes into battle for Brexit" is the Telegraph's, while Ukip's Pravda aka the Express goes for "MPs to vote on EU exit today".

Who's right? Well, it's a bit of both. That the government has only conceded to reveal "a plan" might mean further banalities on a par with the PM's one-liner yesterday that she was seeking a "red white and blue Brexit" ie a special British deal. And they've been aided by a rare error by Labour's new star signing Keir Starmer. Hindsight is 20:20, but if he'd demanded a full-blown white paper the government would be in a trickier spot now. 

But make no mistake: the PM didn't want to be here. It's worth noting that if she had submitted Article 50 to a parliamentary vote at the start of the parliamentary year, when Labour's frontbench was still cobbled together from scotch-tape and Paul Flynn and the only opposition MP seemed to be Nicky Morgan, she'd have passed it by now - or, better still for the Tory party, she'd be in possession of a perfect excuse to reestablish the Conservative majority in the House of Lords. May's caution made her PM while her more reckless colleagues detonated - but she may have cause to regret her caution over the coming months and years.

PANNICK! AT THE SUPREME COURT

David Pannick, Gina Miller's barrister, has told the Supreme Court that it would be "quite extraordinary" if the government's case were upheld, as it would mean ministers could use prerogative powers to reduce a swathe of rights without parliamentary appeal. The case hinges on the question of whether or not triggering Article 50 represents a loss of rights, something only the legislature can do.  Jane Croft has the details in the FT 

SOMETHING OF A GAMBLE

Ministers are contemplating doing a deal with Nicola Sturgeon that would allow her to hold a second independence referendum, but only after Brexit is completed, Lindsay McIntosh reports in the Times. The right to hold a referendum is a reserved power. 

A BURKISH MOVE

Angela Merkel told a cheering crowd at the CDU conference that, where possible, the full-face veil should be banned in Germany. Although the remarks are being widely reported in the British press as a "U-Turn", Merkel has previously said the face veil is incompatible with integration and has called from them to be banned "where possible". In a boost for the Chancellor, Merkel was re-elected as party chairman with 89.5 per cent of the vote. Stefan Wagstyl has the story in the FT.

SOMEWHERE A CLOCK IS TICKING

Michael Barnier, the EU's chief Brexit negotiator, has reminded the United Kingdom that they will have just 15 to 18 months to negotiate the terms of exit when Article 50 is triggered, as the remaining time will be needed for the deal to secure legislative appeal.

LEN'S LAST STAND?

Len McCluskey has quit as general secretary of Unite in order to run for a third term, triggering a power struggle with big consequences for the Labour party. Though he starts as the frontrunner, he is more vulnerable now than he was in 2013. I write on his chances and possible opposition here.

AND NOW FOR SOMETHING COMPLETELY DIFFERENT

Emad asks if One Night Stand provides the most compelling account of sex and relationships in video games yet.

MUST READS

Theresa May is becoming adept at avoiding defeats says George

Liv Constable-Maxwell on what the Supreme Court protesters want

Theresa May risks becoming an accidental Europe wrecker, says Rafael Behr

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