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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Two referendums have revived the Tories and undone Labour

The Scottish vote enabled the Conservatives' rebirth as the party of the Union; the Brexit vote has gifted Theresa May a project to reunite a fragmented right.

In the final week of the Scottish independence referendum campaign, as the Union appeared in peril, David Cameron pleaded with voters to punish his party rather than Scotland. “If you are fed up with the effing Tories, give them a kick,” he said. Cameron’s language reflected a settled view: the Conservatives were irredeemably loathed by Scots. For nearly two decades, the party had no more than one MP north of the border. Changing the party’s name for devolved contests was discussed.

Since becoming Conservative leader, Theresa May has pursued a hard – she prefers “clean” – Brexit strategy that Scots voted against and the Conservatives have achieved a UK-wide poll lead of 20 points.

Yet rather than regressing, the Scottish Conservatives have resurged. On 22 April, a Panelbase poll put them on 33 per cent in Scotland (a rise of 18 points since 2015). A favoured Labour barb used to be that there were more pandas (two) in Scotland than Tory MPs (one). The poll would leave the Tories with 12 seats and Corbyn’s party with none. Tory aides confess that they were surprised by the figures but declare there are “no limits to our ambitions” in Scotland.

The roots of this recovery lie in the 2014 independence referendum. The vote, and the SNP’s subsequent landslide victory in the 2015 general election, realigned Scottish politics along unionist and nationalist lines. Led by Ruth Davidson, the Scottish Conservatives have ably exploited the opportunity. “We said No. We meant it,” the party’s official slogan declares of Nicola Sturgeon’s demand for a second referendum. Under Ruth Davidson, the Tories have already become the official opposition at Holyrood.

Labour is torn between retaining unionists and winning back nationalists. It has been punished for its equivocation, as it is being punished over its confused response to Brexit. In April 2016, the Scottish Labour leader, Kezia Dugdale, said that it was “not inconceivable” that she could back independence if the UK voted to leave the EU (and earlier suggested that MPs and MSPs could be given a free vote). Jeremy Corbyn recently stated that he was “absolutely fine” with a second referendum being held.

“For us it’s a badge of honour but there are some people in Scottish Labour who are quite queasy about that word [unionist] and I think Jeremy Corbyn would be very queasy about it,” Adam Tomkins, a Conservative MSP for Glasgow and public law professor, told me. “Don’t forget the Northern Ireland dimension; we’ve all seen the photos of him rubbing shoulders with leading republicans. The Scottish Union is very different to the Irish Union but the word migrates.”

The irony is that Corbyn allies believed his anti-austerity, anti-Trident platform would allow Labour to recover in Scotland. Yet the pre-eminence of the national question has left it in a political no-man’s land.

In contrast to the rest of the UK, Scots backed Remain by 62 per cent to 38 per cent. Far from protecting EU membership, as David Cameron had promised in the referendum campaign, the preservation of the Union now threatened it. Theresa May has since yielded no ground, denying Scotland both a second independence referendum on terms dictated by the SNP and single market membership. But polls show no rise in support for independence.

Conservative aides believe that Sturgeon miscalculated by immediately raising the prospect of a second referendum following the Leave vote last June. Families and communities were riven by the 2014 contest. Most had little desire to disrupt the uneasy peace that has prevailed since.

Nor are the politics of Brexit as uncomplicated as some assume. Thirty-six per cent of SNP supporters voted Leave and more than a third of this bloc have since turned against independence. As elsewhere, some Remainers have accepted the result and fear the instability that secession would cause. Scotland’s trade with the UK is worth four times as much as that with the EU. Davidson, who was one of the most forceful advocates for Remain, says that pursuing independence to counter the effects of Brexit would be “stubbing your toe to then amputate your foot”.

Theresa May, who spoke of the “precious” Union when she became Prime Minister, has devoted great attention to Scotland. Cabinet ministers are instructed to develop a “Scottish plan” when they formulate policy; buildings funded by the UK government now bear its insignia. Davidson’s influence was crucial to May’s decision to retain the 0.7 per cent foreign aid commitment – an emblem of compassionate conservatism.

After a decade of SNP rule, Tory aides believe that their rival’s poor domestic record, most notably on education, is “catching up with them”. More than a year has elapsed since the Scottish Parliament passed new legislation. “We’ve got a government that simply isn’t very interested in governing,” Tomkins said. “I thought that Nicola [Sturgeon] would change that. I was wrong.” What preoccupies the SNP is the constitutional question.

Shortly after the remarkable Scottish polls, a new survey showed the Tories on course to win the most seats in Wales for the first time since 1859. For some former Labour supporters, voting Ukip is proving a gateway drug to voting Conservative.

Two referendums have now realigned politics in the Tories’ favour. The Scottish vote enabled their rebirth as the party of the Union; the Brexit vote has gifted May a project to reunite a fragmented right.

Before the 2015 general election, Labour derided the Tories as a southern English force unworthy of their official name: the Conservative and Unionist Party. Partly through accident and partly through design, May and Davidson are now reclaiming it. 

George Eaton is political editor of the New Statesman.

This article first appeared in the 27 April 2017 issue of the New Statesman, Cool Britannia 20 Years On

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