George Osborne speaks at an event in Sydney on February 21, 2014. Photograph: Getty Images.
Show Hide image

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.

Signet Classics
Show Hide image

When the world seems dark and terrifying, we shouldn’t feel ashamed to dream of Utopia

Right now, the future seems dark and frightening and it is precisely now that we must continue to imagine other worlds and then plot ways to get there.

There are many cruel and routine lies we tell to children but perhaps the most indicative is this: if you tell anyone your wish, it won’t come true. This parable was probably invented by parents trying to avoid the trauma of not being able to give their children what they want but we carry it with us to adulthood, when it is repeated to us by our leaders. Don’t tell anyone the sort of world you would like to see – at best you’ll be disappointed and at worst you’ll be arrested.

“We want more.” This week, exhausted by the news, I dragged myself out of the house to a book fair, where I came across a new collection of utopian fiction by radical women. That was the first line and it stopped my breath in my throat. When basic survival seems like a stretch goal, caught as we are between the rich and the rising seas, hope feels like an unaffordable luxury. The precise words I used to the bookseller were, “Shut up and take my money.”

There has never been a more urgent time for utopian ideas, precisely because the concept of a better world has never felt further away. Right now, world leaders are deciding how many cities are going to sink before something is done to reduce carbon emissions. They are meeting in Paris, which very recently saw the opening scene of a new act in everyone’s least favourite dramatic franchise, “War in the Middle East”. We seem to be living in a dystopian trilogy scripted by a sadistic young-adult author and I very much hope that our plucky young heroes show up to save the day soon, even if there’s a clunky love triangle involved.

Dystopias are easy to construct: to paraphrase the novelist Kim Stanley Robinson, you might as well pick five news headlines at random, make a collage and there’s your plot. Utopias are harder. Utopias require that we do the difficult, necessary work of envisioning a better world. This is why imagination is the first, best weapon of radicals and progressives.

Utopian stories existed long before the word was coined by Thomas More in the 16th century to mean an ideal society, or “no-place”. Plato’s Republic has some claim to being the first but there are as many Utopias as there are communities that dreamed of a better life. The greatest age of utopian fiction was the turn of the last century and it is no accident that the early 21st century is a great age of dystopian fiction. The ideology of late-capitalist patriarchy has become so all-encompassing that it no longer looks like ideology. Fredric Jameson observed, “It is easier to imagine the end of the world than the end of capitalism” – and the reason for that is not that capitalism is the inevitable destiny of humankind but that we have spent our lives being told that even thinking about any other future makes us ridiculous.

Most leftists do have an idea of the sort of world they would prefer to see. We don’t say what we want for the same reason that we were told as children not to tell anyone else what we wished for – because it’ll be awkward and painful if we don’t get it.

When I think about Utopia, I think about my grandmother. My mother’s mother left school at 13, lived through the Maltese blockade and was obliged by religion and circumstance to marry young, suffocate all her dreams of education and adventure and spend her life taking care of a husband and six kids. Half a century later, I can choose when and whether to have children. I can choose to live independently from men. I regularly travel alone and there are no legal restrictions on getting any job I’m suited for.

The kind of independence many women my age can enjoy would have been almost unimaginable half a century ago – but somebody did imagine it and that is why we got here. A great many somebodies, over centuries of struggle and technological advancement, asked how the world could be different for women and set about making it happen.

Exactly a century ago, Charlotte Perkins Gilman’s novel Herland envisioned a society of women in which production was communal, motherhood was valued, relationships were equal and rape and violence were unknown. Reading Herland today, it is striking that for every proposition that came true – women are now allowed to divorce their husbands and participate fully in political life – there are two more that seem as far-fetched now as they did in 1915. Motherhood is still not valued as work. Women are still expected to organise our lives around the threat of sexual violence. But all that can change as long as we continue to ask for more.

For as long as I have been a feminist, I have been asked – usually by grumbling men – when, exactly, we will be satisfied; when women and girls will decide we have enough. The answer is contained in the question: because the instant that we do decide that we are satisfied, that there can never be a better world than this, is the instant that the future shuts down and change becomes impossible.

Utopia is the search for Utopia. It is the no-place by whose light you plot a course through a harsh and unnavigable present. By the time you reach the horizon, it is no longer the horizon but that doesn’t mean you stop going forwards.

Right now, the future seems dark and frightening and it is precisely now that we must continue to imagine other worlds and then plot ways to get there. In the midst of multiple global crises, the only truly ridiculous proposition is that things are going to stay exactly the same.

Human societies are going to change beyond recognition and from the conference table to the streets, our best shot at surviving that change starts when we have the courage to make impossible demands – to face down ridicule and say, “We want more.”

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.

This article first appeared in the 26 November 2015 issue of the New Statesman, Terror vs the State