George Osborne speaks at an event in Sydney on February 21, 2014. Photograph: Getty Images.
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Those who pay the 40p tax rate are not "the middle"

Just 15 per cent earn enough to pay the higher rate. Osborne is right to focus on helping the low-paid.

Two days ahead of the Budget, the Conservative revolt over George Osborne's stance on the 40p tax rate is continuing. The Chancellor's refusal to increase the threshold for the higher rate, in favour of helping low-earners through another large rise in the personal allowance (which is set to be increased from £10,000 to at least £10,500), is enraging those Tories concerned that the party's natural "middle class" supporters are being caught in a tax band intended for the rich.

Owing to successive reductions in the 40p threshold (which currently stands at £41,451, down from £43,875 in 2010), the number of people paying the rate has risen to a record high of 4.4m, up from 3m before the election. Norman Lamont and Nigel Lawson have both urged Osborne to act to relieve the "squeezed middle", while the Institue of Directors has warned of the damaging effect on work incentives. The Chancellor's alleged suggestion that the surge in the number of 40p taxpayers would aid the Tories by making voters feel a "success" (which may be partly true) has added fuel to the fire.

But barring a surprise U-turn on Wednesday (not unheard of in Budgets), he will ignore the pleas from right and increase the threshold by no more than 1 per cent, below the rate of inflation. It is far better, he believes, to target limited resources (the deficit is forecast to be £111bn this year) at the low-paid, who will benefit significantly from another rise in the personal allowance. This invites the rejoinder that Osborne chose to cut taxes for the richest 1 per cent by reducing the top rate from 50p to 45p in his 2012 Budget. But it is at least partly to compensate for that kamikaze act that the Chancellor is determined to reposition the Tories as the party for the low-paid

In this respect, Osborne is entirely right: it is not those who pay the 40p rate who are most in need of relief. Far from representing "the middle", those who are caught by the tax band represent the top 15 per cent of earners. The median salary for a full-time employee in the UK is just £26,884, well below the £41,451 you need to earn before paying the 40p rate. And even after falling within its reach, they will only pay the rate on income above this level (not their entire salary) meaning that the effect for many will be negligible. There may well be strong arguments for increasing the 40p threshold (Osborne should certainly be taxing the top 1 per cent far more) but it says much about the gulf between rhetoric and reality that higher rate taxpayers are still routinely described by the media and politicians as "the middle".

As I've noted before, there are better ways of supporting the low paid than raising the personal allowance - which will do nothing to help the five million workers who earn below £10,000.  It is those in the second-richest decile who gain the most in cash terms from the policy (mainly due to the greater number of dual-earning households), followed by the richest tenth, who gain marginally less due to the gradual removal of the personal allowance after £100,000 (a brilliant piece of stealth redistribution by Alistair Darling). As a percentage of income, it is middle-earners who gain the most, with those at the bottom gaining the least. Progressive alternatives to raising the income tax threshold include increasing the National Insurance (NI) threshold, which currently stands at £7,748, cutting VAT, which stands at a record 20 per cent and hits the poorest hardest, or raising in-work benefits such as tax credits.

But a rise in the personal allowance will at least do something to aid lower and middle earners, in contrast to a rise in the 40p threshold, which would benefit no one but the top 15 per cent.

George Eaton is political editor of the New Statesman.

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Expressions of sympathy for terror's victims may seem banal, but it's better than the alternative

Angry calls for "something to be done" play into terrorists' hands.

No sooner had we heard of the dreadful Manchester Arena bombing and before either the identity of the bomber or the number of dead were known, cries of “something must be done” echoed across social media and the airwaves. Katie Hopkins, the Mail Online columnist, called for “a final solution”, a tweet that was rapidly deleted, presumably after she remembered (or somebody explained to her) its connotations. The Telegraph columnist Allison Pearson wanted “a State of Emergency as France has” and “internment of thousands of terror suspects”, apparently unaware that the Nice attack, killing 86, happened after that emergency was declared and that nobody has been interned anyway.

It cannot be said too often that such responses play into terrorists’ hands, particularly if Isis was behind the Manchester bombing. The group’s aim is to convince Muslims in the West that they and their families cannot live in peace with the in-fidel and will be safe only if they join the group in establishing a caliphate. Journalists, striving for effect, often want to go beyond ­banal expressions of sympathy for ­victims. (It’s a mistake I, too, have sometimes made.) But occasionally the banal is the appropriate response.

Pity begins at home

Mark Twain, writing about the “terror” that followed the French Revolution and brought “the horror of swift death”, observed that there was another, older and more widespread, terror that brought “lifelong death from hunger, cold, insult, cruelty and heartbreak”. The first, he wrote, we had been “diligently taught to shiver and mourn over”; the other we had never learned to see “in its vastness or pity as it deserves”.

That is true: more children across the world die each day from hunger or disease than could ever be killed in a terror attack. We should not forget them. Nor should we forget that the numbers killed in terrorist attacks in, for example, Baghdad far outnumber those killed in all European attacks of our times combined. In an age of globalisation, we should be more cosmopolitan in our sympathies but the immediacy of 24-hour news make us less so.

When all is said and done, however, pity, like charity, begins at home. We naturally grieve most over those with whom we share a country and a way of life. Most of us have been to concerts and some readers will have been to one at the Manchester Arena. We or our children could have been present.

Cheers from Highgate Cemetery

What a shame that Theresa May modified the Tory manifesto’s proposals on social care. For a few giddy days, she was proposing the most steeply progressive (or confiscatory, as the Tories would normally say) tax in history. True, it was only for those unfortunate enough to suffer conditions such as dementia, but the principle is what counts. It would have started at zero for those with assets of less than £100,000, 20 per cent for those with £120,000, 50 per cent for those worth £200,000, 99 per cent with those with £10m and so on, ad infinitum. Karl Marx would have been cheering from Highgate Cemetery.

Given that most people’s main asset – the value of their home – did not have to be sold to meet their care costs until death, this was in effect an inheritance tax. It had tantalising implications: to secure their inheritance, children of the rich would have had to care for their parents, possibly sacrificing careers and risking downward mobility, while the children of the poor could have dedicated themselves to seeking upward mobility.

The Tories historically favour, in John Major’s words, wealth cascading down the generations. In recent years they have all but abolished inheritance tax. Now they have unwittingly (or perhaps wittingly, who knows?) conceded that what they previously branded a “death tax” has some legitimacy. Labour, which proposes a National Care Service but optimistically expects “cross-party consensus” on how to finance it, should now offer the clarity about old age that many voters crave. Inheritance tax should be earmarked for the care service, which would be free at the point of use, and it should be levied on all estates worth (say) £100,000 at progressive rates (not rising above even 50 per cent, never mind 99 per cent) that yield sufficient money to fund it adequately.

Paul Dacre’s new darling

Paul Dacre, the Daily Mail editor, is in love again. “At last, a PM not afraid to be honest with you,” proclaimed the paper’s front page on Theresa May’s manifesto. Though the Mail has previously argued that to make old people use housing wealth to fund care is comparable to the slaughter of the first-born, an editorial said that her honesty was exemplified by the social care proposals.

On the morning of the very day that May U-turned, the Mail columnist Dominic Lawson offered a convoluted defence of the failure to cap what people might pay. Next day, with a cap announced, the Mail hailed “a PM who’s listening”.

Dacre was previously in love with Gordon Brown, though not to the extent of recommending a vote for him. What do Brown and May have in common? Patriotism, moral values, awkward social manners, lack of metropolitan glitz and, perhaps above all, no evident sense of humour. Those are the qualities that win Paul Dacre’s heart.

Sobering up

Much excitement in the Wilby household about opinion polls that show Labour reducing the Tories’ enormous lead to, according to YouGov, “only” 9 percentage points. I find myself babbling about ­“Labour’s lead”. “What are you talking about?” my wife asks. When I come to my senses, I realise that my pleasure at the prospect, after seven years of Tory austerity, of limiting the Tories’ majority to 46 – more than Margaret Thatcher got in 1979 – is a measure of my sadly diminished expectations. l

Peter Wilby was editor of the Independent on Sunday from 1995 to 1996 and of the New Statesman from 1998 to 2005. He writes the weekly First Thoughts column for the NS.

This article first appeared in the 25 May 2017 issue of the New Statesman, Why Islamic State targets Britain

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