George Osborne speaks at an event in Sydney on February 21, 2014. Photograph: Getty Images.
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Tory group calls for Osborne to embrace the 45p tax rate - he should listen

Renewal's call for the 45p tax threshold to be reduced to £62,000 to fund the abolition of the 40p rate is smart politics.

There are nine days to go until the Budget, so Conservative groups and think-tanks are busy sending their wishlists to Number 11. By far the most striking proposal comes from Renewal, the organisation founded by David Skelton to widen the party's appeal among northern, working class and ethnic minority voters. In an article in today's Telegraph, Skelton calls for the abolition of the 40p income tax rate, the source of much Tory complaint. As he notes, owing to successive reductions in the tax threshold (which currently stands at £41,350, down from £43,875 in 2010), the number of people paying the higher rate has risen to a record high of 4.4m (up from 3m in 2010). He writes: "More and more people on middle incomes have been dragged into paying the 40 per cent rate of tax over the past decade. That includes teachers, nurses, bricklayers, police officers and Tube drivers. These are not people who should be in the higher rate tax bracket but are because the threshold at which it is paid has been repeatedly frozen." (Although it is worth remembering that only 14 per cent of workers earn enough to pay the rate.) 

But rather than proposing to fund its abolition through greater spending cuts, as most Tories would, Skelton calls for the move to be funded by reducing the threshold for the 45p rate from £150,000 to £62,000. This, he says, would ensure that the measure is fiscally neutral, and he goes on to make a principled case for progressive taxation: 

We calculate that a person would have to earn more than £85,000 to be worse off with this proposal and those earning above that threshold would bear the burden of the change. Someone on £120,000 would be about £830 worse off and anyone earning £150,000 or more would be £2,400 worse off. As ever in taxation, someone has to pay and it is those who are very well off who will do so, meaning that the proposal is fiscally neutral.

When he was defending the 1909 “People’s Budget”, David Lloyd George said that “we are placing burdens on the broadest shoulders”. Under our proposals, the very richest would pay a little more, while the overwhelming majority of working people would benefit, some of them considerably.

Skelton's proposal reflects Renewal's concern with improving the Tories' standing among blue collar voters ("a Workers' Budget from a Workers' Party"), which includes taxing the well-off more heavily in order to improve the living standards of the majority. Robert Halfon, the MP for Harlow, and the group's parliamentary leader, has previously called for the revenue from the 45p rate to be ring-fenced in order to fund the restoration of the 10p tax band (having opposed the decision to abolish the 50p rate) and for the introduction of a windfall tax on the energy companies. 

All of this is smart politics (voters overwhelmingly support progressive taxation) and good policy, but also entirely at odds with the current Conservative consensus (Skelton's article has earned him a sharp rebuke from the Telegraph's Benedict Brogan). Rather than supporting the 45p rate as a just measure, not least at a time of austerity, senior Tories continue to give the impression of wanting to scrap it at the first opportunity. Asked by the Spectator last year whether he would like to reduce the top rate to 40p, David Cameron said: "I will leave tax as a matter for the Chancellor. I am a low-tax Conservative." And the Chancellor? He has similarly refused to rule out cutting the rate again. Meanwhile, Boris Johnson, Osborne's main contender for the Conservative throne, has suggested that the Tories should "brood" on reducing it to 3op. In the absence of a dramatic ideological volte-face, there is no prospect of any of them taking up Renewal's plan. But if the Tories are to ever shed their reputation as the "party of the rich", and start to dream of winning a majority again, it is the kind of imaginative thinking they will need to embrace. 

George Eaton is political editor of the New Statesman.

Photo: Getty
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Like it or hate it, it doesn't matter: Brexit is happening, and we've got to make a success of it

It's time to stop complaining and start campaigning, says Stella Creasy.

A shortage of Marmite, arguments over exporting jam and angry Belgians. And that’s just this month.  As the Canadian trade deal stalls, and the government decides which cottage industry its will pick next as saviour for the nation, the British people are still no clearer getting an answer to what Brexit actually means. And they are also no clearer as to how they can have a say in how that question is answered.

To date there have been three stages to Brexit. The first was ideological: an ever-rising euroscepticism, rooted in a feeling that the costs the compromises working with others require were not comparable to the benefits. It oozed out, almost unnoticed, from its dormant home deep in the Labour left and the Tory right, stoked by Ukip to devastating effect.

The second stage was the campaign of that referendum itself: a focus on immigration over-riding a wider debate about free trade, and underpinned by the tempting and vague claim that, in an unstable, unfair world, control could be taken back. With any deal dependent on the agreement of twenty eight other countries, it has already proved a hollow victory.

For the last few months, these consequences of these two stages have dominated discussion, generating heat, but not light about what happens next. Neither has anything helped to bring back together those who feel their lives are increasingly at the mercy of a political and economic elite and those who fear Britain is retreating from being a world leader to a back water.

Little wonder the analogy most commonly and easily reached for by commentators has been that of a divorce. They speculate our coming separation from our EU partners is going to be messy, combative and rancorous. Trash talk from some - including those in charge of negotiating -  further feeds this perception. That’s why it is time for all sides to push onto Brexit part three: the practical stage. How and when is it actually going to happen?

A more constructive framework to use than marriage is one of a changing business, rather than a changing relationship. Whatever the solid economic benefits of EU membership, the British people decided the social and democratic costs had become too great. So now we must adapt.

Brexit should be as much about innovating in what we make and create as it is about seeking to renew our trading deals with the world. New products must be sought alongside new markets. This doesn’t have to mean cutting corners or cutting jobs, but it does mean being prepared to learn new skills and invest in helping those in industries that are struggling to make this leap to move on. The UK has an incredible and varied set of services and products to offer the world, but will need to focus on what we do well and uniquely here to thrive. This is easier said than done, but can also offer hope. Specialising and skilling up also means we can resist those who want us to jettison hard-won environmental and social protections as an alternative. 

Most accept such a transition will take time. But what is contested is that it will require openness. However, handing the public a done deal - however well mediated - will do little to address the division within our country. Ensuring the best deal in a way that can garner the public support it needs to work requires strong feedback channels. That is why transparency about the government's plans for Brexit is so important. Of course, a balance needs to be struck with the need to protect negotiating positions, but scrutiny by parliament- and by extension the public- will be vital. With so many differing factors at stake and choices to be made, MPs have to be able and willing to bring their constituents into the discussion not just about what Brexit actually entails, but also what kind of country Britain will be during and after the result - and their role in making it happen. 

Those who want to claim the engagement of parliament and the public undermines the referendum result are still in stages one and two of this debate, looking for someone to blame for past injustices, not building a better future for all. Our Marmite may be safe for the moment, but Brexit can’t remain a love it or hate it phenomenon. It’s time for everyone to get practical.