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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Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle