Why Danny Alexander's promise to keep the 45p tax rate can't be trusted

The Lib Dems says the top tax rate will be cut "over my dead body". But he said the same about the 50p rate in 2011.

Danny Alexander's decision last week to attack Labour's "borrowing bombshell" (a conspicuous echo of Conservative rhetoric) and to outline coalition spending totals until 2020-21 went down predictably badly with the Lib Dem left. Just three days before his intervention, Vince Cable had emphasised that his party was not bound to George Osborne's post-2015 deficit reduction timetable: "There are different ways of finishing the job … not all require the pace and scale of cuts set out by the chancellor. And they could allow public spending to stabilise or grow in the next parliament, whilst still getting the debt burden down." But Alexander's willingness to join the Chancellor in a united front against Ed Balls appeared to confirmed the long-held suspicion that he has gone "native" at the Treasury (the joke runs that the Lib Dem man in the Treasury has become the Treasury man in the Lib Dems). 

In response, Prateek Buch, the co-chair of the Social Liberal Forum (and a Staggers contributor), said: "Cuts on the scale planned by Osborne just cannot be delivered. So why should Lib Dems endorse the Chancellor’s straitjacket? It is beyond me why Danny would sign up to what appears to be joint Lib Dem/Tory spending plans going beyond the end of the next parliament, when no such figures have been agreed by his own party. It is unhelpful to pre-empt the party’s manifesto process in this way. Besides, the plans take no account of the need to invest, or what will happen to GDP. What happened to differentiating ourselves from the Tories?"

Perhaps unsettled by this criticism, today finds Alexander seeking to put some clear yellow water between himself and his coalition partners. He tells the Daily Mirror that a cut in the 45p tax rate (which the Tories have repeatedly refused to rule out) will happen "over my dead body" and says of the claim that he has gone "native": "If that’s what people think about me, then they are wrong. I am Liberal Democrat – full stop, end of story." 

But given past form, don't be surprised if Osborne ends up walking over Alexander's corpse on his way to deliver the Budget. In July 2011, the Chief Secretary to the Treasury said of those calling for the abolition of the 50p tax rate: "The idea that we're going to somehow shift our focus to the wealthiest in the country at a time when everyone's under pressure is just in cloud cuckoo land". But eight months later, Osborne did just that (while failing to introduce the mansion tax that the Lib Dems demanded in return). While there is no sign that the Tories are considering another reduction in the top rate in this parliament (in what would be a pre-election gift to Labour), it would be unwise to take Alexander's word for it.

Asked about the subject on the Today programme this morning, Boris Johnson quipped that "the last thing I want to see is a pointless sacrifice from the Liberal Democrats, let alone the dead body of Danny Alexander" before hinting that the next Conservative manifesto would, at the very least, not commit to keeping the 45p rate. He said: "I can't believe we're going to go into an election with a tax rate so high." Since it's the Mayor's brother, Jo Johnson (the head of the No. 10 policy board) who is responsible for the manifesto, he can be assumed to speak with some authority on this matter. Finally, asked whether Alexander could be thrown over board to allow a cut in the top rate, he intriguingly remarked: "stranger things have happened at sea". 

Danny Alexander at the Liberal Democrat conference in Glasgow last year. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
Show Hide image

As long as the Tories fail to solve the housing crisis, they will struggle to win

The fall in the number of homeowners leaves the Conservatives unable to sell capitalism to those with no capital. 

For the Conservatives, rising home ownership was once a reliable route to government. Former Labour voters still speak of their gratitude to Margaret Thatcher for the Right to Buy scheme. But as home ownership has plummeted, the Tories have struggled to sell capitalism to a generation without capital. 

In Britain, ownership has fallen to 63.5 per cent, the lowest rate since 1987 and the fourth-worst in the EU. The number of private renters now exceeds 11 million (a larger number than in the social sector). The same policies that initially promoted ownership acted to reverse it. A third of Right to Buy properties fell into the hands of private landlords. High rents left tenants unable to save for a deposit.

Rather than expanding supply, the Tories have focused on subsidising demand (since 2010, housebuilding has fallen to its lowest level since 1923). At a cabinet meeting in 2013, shortly after the launch of the government’s Help to Buy scheme, George Osborne declared: “Hopefully we will get a little housing boom and everyone will be happy as property values go up”. The then-chancellor’s remark epitomised his focus on homeowners. Conservative policy was consciously designed to enrich the propertied.

A new report from the Resolution Foundation, Home Affront: housing across the generations, shows the consequences of such short-termism. Based on recent trends, less than half of millennials will buy a home before the age of 45 compared to over 70 per cent of baby boomers. Four out of every ten 30-year-olds now live in private rented accommodation (often of substandard quality) in contrast to one in ten 50 years ago. And while the average family spent just 6 per cent of their income on housing costs in the early 1960s, this has trebled to 18 per cent. 

When Theresa May launched her Conservative leadership campaign, she vowed to break with David Cameron’s approach. "Unless we deal with the housing deficit, we will see house prices keep on rising," she warned. "The divide between those who inherit wealth and those who don’t will become more pronounced. And more and more of the country’s money will go into expensive housing instead of more productive investments that generate more economic growth."

The government has since banned letting agent fees and announced an additional £1.4bn for affordable housing – a sector entirely neglected by Cameron and Osborne (see graph below). Social housing, they believed, merely created more Labour voters. "They genuinely saw housing as a petri dish for voters," Nick Clegg later recalled. "It was unbelievable." 

But though housebuilding has risen to its highest levels since 2008, with 164,960 new homes started in the year to June 2017 and 153,000 completed, this remains far short of the 250,000 required merely to meet existing demand (let alone make up the deficit). In 2016/17, the government funded just 944 homes for social rent (down from 36,000 in 2010). 

In a little-noticed speech yesterday, Sajid Javid promised a "top-to-bottom" review of social housing following the Grenfell fire. But unless this includes a substantial increase in public funding, the housing crisis will endure. 

For the Conservatives, this would pose a great enough challenge in normal times. But the political energy absorbed by Brexit, and the £15bn a year it is forecast to cost the UK, makes it still greater.

At the 2017 general election, homeowners voted for the Tories over Labour by 55 per cent to 30 per cent (mortgage holders by 43-40). By contrast, private renters backed Labour by 54 per cent to 31 per cent. As long as the latter multiply in number, while the former fall, the Tories will struggle to build a majority-winning coalition. 

George Eaton is political editor of the New Statesman.