Osborne refuses to rule out cutting top tax rate to 40%

Despite being repeatedly pressed by Ed Balls at Treasury questions, the Chancellor refuses to comment on whether the Tories want to reduce the top rate from 45 per cent to 40 per cent.

After the growth figures released this morning, George Osborne was always likely to enjoy his bout with Ed Balls at today's Treasury questions. So loud was the roar from the Conservative benches when Balls stood up that the Speaker was forced to interject immediately, assuring them "you've got the man at the box for whom you were waiting".

Once the Tories had settled down, Balls began his question by noting that "after three damaging years of flatlining", today's growth figures were "welcome" (prompting another roar), before challenging Osborne on the "dodgy figures" used last week to claim that living standards were rising. Osborne, in full assassination mode, welcomed the "very important Labour economic announcement" that Balls will remain "in his job" and declared, "what they need on the other side of the House is new crystal balls". As Tory MPs guffawed, an unamused shadow chancellor replied: "very good, very good, Chancellor, a joke about my name being called Balls, fabulous."

After his announcement at the weekend that Labour would reintroduce the 50p rate tax if elected, he then invited Osborne to rule out a further reduction in the rate to 40p after 2015. He said:

Let me ask the Chancellor about the one thing that he has refused to talk about now for four days. He's delivered one massive tax cut for the richest one per cent earning over £150,000 when everybody else is worse off. The Prime Minister and the Mayor of London are now saying that they want to cut the top rate of income tax again to 40p. Is that really the Conservative Party priority? If this Chancellor still believes "we're all in this together", why won't he stand up at this despatch box now and rule out another top rate tax cut from the Conservatives in the next Parliament? Come on, George, stand up and rule it out.

To this, Osborne offered a lengthy response but notably refused to even come close to ruling out another tax cut. He said:

I'll tell you the big tax cut in this parliament, it's for working people by increasing the personal allowance to £10,000. And what is clear after the last week, is that the shadow chancellor has learned absolutely nothing from the economic mess that he brought upon this country. He said Labour should have spent more money in the boom, he set out fiscal plans that would allow billions more of borrowing, and on the top rate of tax, he announced a plan that was attacked by the Labour ministers he served in government with, by the people who lend the Labour Party money, by credible business people across the country, and the costings he produced were shot down by the Institute of Fiscal Studies last night. There couldn't have been a more disastrous policy launch in the history of the modern Labour Party. And on the day that we've learned that our economy continues to grow, isn't it clear that the anti-business Labour Party is now the biggest risk to the economic recovery.

A verbose answer, as I said, but not a word on whether the top rate will be reduced again (despite loud heckling by Balls). By refusing to rule out another "millionaire's tax cut", Osborne is handing Labour a new election attack line. Not only will Labour be able to remind voters that the Tories cut taxes for the highest 1 per cent of earners, it will be able to warn them that they're prepared to do the same again. Whether or not this is good economics (and there is no evidence that a 50p rate would genuinely damage growth), it is terrible politics. As a YouGov poll reminds us today, the public overwhelmingly support the 50p rate, with 61 per cent in favour and just 26 per cent opposed. By 45 per cent to 19 per cent, they believe it will help the economic recovery rather than damage it, and, by 50 per cent to 29 per cent, that it will raise additional revenue.

Osborne is often accused of being solely influenced by political calculations, but on this issue he is allowing ideology to trump all.

George Osborne at the World Economic Forum in Davos last week. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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The tale of Battersea power station shows how affordable housing is lost

Initially, the developers promised 636 affordable homes. Now, they have reduced the number to 386. 

It’s the most predictable trick in the big book of property development. A developer signs an agreement with a local council promising to provide a barely acceptable level of barely affordable housing, then slashes these commitments at the first, second and third signs of trouble. It’s happened all over the country, from Hastings to Cumbria. But it happens most often in London, and most recently of all at Battersea power station, the Thames landmark and long-time London ruin which I wrote about in my 2016 book, Up In Smoke: The Failed Dreams of Battersea Power Station. For decades, the power station was one of London’s most popular buildings but now it represents some of the most depressing aspects of the capital’s attempts at regeneration. Almost in shame, the building itself has started to disappear from view behind a curtain of ugly gold-and-glass apartments aimed squarely at the international rich. The Battersea power station development is costing around £9bn. There will be around 4,200 flats, an office for Apple and a new Tube station. But only 386 of the new flats will be considered affordable

What makes the Battersea power station development worse is the developer’s argument for why there are so few affordable homes, which runs something like this. The bottom is falling out of the luxury homes market because too many are being built, which means developers can no longer afford to build the sort of homes that people actually want. It’s yet another sign of the failure of the housing market to provide what is most needed. But it also highlights the delusion of politicians who still seem to believe that property developers are going to provide the answers to one of the most pressing problems in politics.

A Malaysian consortium acquired the power station in 2012 and initially promised to build 517 affordable units, which then rose to 636. This was pretty meagre, but with four developers having already failed to develop the site, it was enough to satisfy Wandsworth council. By the time I wrote Up In Smoke, this had been reduced back to 565 units – around 15 per cent of the total number of new flats. Now the developers want to build only 386 affordable homes – around 9 per cent of the final residential offering, which includes expensive flats bought by the likes of Sting and Bear Grylls. 

The developers say this is because of escalating costs and the technical challenges of restoring the power station – but it’s also the case that the entire Nine Elms area between Battersea and Vauxhall is experiencing a glut of similar property, which is driving down prices. They want to focus instead on paying for the new Northern Line extension that joins the power station to Kennington. The slashing of affordable housing can be done without need for a new planning application or public consultation by using a “deed of variation”. It also means Mayor Sadiq Khan can’t do much more than write to Wandsworth urging the council to reject the new scheme. There’s little chance of that. Conservative Wandsworth has been committed to a developer-led solution to the power station for three decades and in that time has perfected the art of rolling over, despite several excruciating, and occasionally hilarious, disappointments.

The Battersea power station situation also highlights the sophistry developers will use to excuse any decision. When I interviewed Rob Tincknell, the developer’s chief executive, in 2014, he boasted it was the developer’s commitment to paying for the Northern Line extension (NLE) that was allowing the already limited amount of affordable housing to be built in the first place. Without the NLE, he insisted, they would never be able to build this number of affordable units. “The important point to note is that the NLE project allows the development density in the district of Nine Elms to nearly double,” he said. “Therefore, without the NLE the density at Battersea would be about half and even if there was a higher level of affordable, say 30 per cent, it would be a percentage of a lower figure and therefore the city wouldn’t get any more affordable than they do now.”

Now the argument is reversed. Because the developer has to pay for the transport infrastructure, they can’t afford to build as much affordable housing. Smart hey?

It’s not entirely hopeless. Wandsworth may yet reject the plan, while the developers say they hope to restore the missing 250 units at the end of the build.

But I wouldn’t hold your breath.

This is a version of a blog post which originally appeared here.

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