Ed Balls speaks at the Labour conference in 2013 in Brighton. Photograph: Getty Images.
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Balls puts the Tories on the spot over tax cuts for the rich

Shadow chancellor challenges Osborne and Cameron over failure to rule out cutting top rate from 45p to 40p. 

Labour's summer offensive (contrasting with what one shadow minister describes as last year's "summer of silence") continues today with a speech by Ed Balls on the economy in the bellwether seat of Bedford. 

Balls will reveal new figures from the House of Commons Library showing that by 2015, average earnings will have fallen by the highest amount since the 1874-1880 parliament. In addition, based on current trends, this parliament will be the first since the 1920s in which real earnings have been lower at the end than at the beginning. It's a reminder that, however fast the economy grows, Labour will still be able to go into the general election answering Ronald Reagan's question - "Are you better off than you were four years ago?" - in the negative. "From a Conservative-led government that promised to make working people better off back in 2010, this is a dismal record of failure," Balls will say.

But the most notable political line is on tax. After the success that Labour enjoyed in attacking the coalition's abolition of the 50p tax rate ("the millionaire's tax cut") in 2012, Balls will warn that the Tories are prepared to do it all over again. 

"We know the Tories' real economic plan - it's to cut taxes at the top and hope that wealth will just trickle down," he will say. 

"Having already cut taxes for millionaires in this Parliament, they're champing at the bit to do it again if they win the election - cutting the top rate of tax for people earning over £150,000 again from 45p to 40p. Another tax cut worth £3 billion for the richest one per cent of our country.

"We know George Osborne wanted to cut it down to 40p in his omnishambles Budget two years ago. David Cameron won't rule out doing it. And Boris Johnson and the right are now demanding it. This is the real Tory agenda for a second term. The same old Tories standing up for the few, while everyone else is left behind. And it shows just how much is at stake next year."

There is a simple reason why Osborne and Cameron have conspicuously failed to rule out scrapping the 45p rate: they think it would be a good idea. But whatever economic justification they can offer for this stance (and there is no evidence that a tax rate of 45p, or, indeed, one of 50p is harmful to growth), it is terrible politics. As a recent YouGov poll showed, the public overwhelmingly support the 50p rate, with 61 per cent in favour and just 26 per cent opposed. By 45 per cent to 19 per cent, they believe it will help the economic recovery rather than damage it, and, by 50 per cent to 29 per cent, that it will raise additional revenue.

Osborne is often accused of being solely influenced by political calculations, but on this issue he is allowing ideology to trump all.

Update: In his speech, Balls again warned that the government's failure to increase housing supply meant there was now "a real risk that interest rates will rise prematurely" to rein in the market. 

Speaking in Bedford, where Harold Macmillan first declared in 1957 "you’ve never had it so good", he also said that while the Tory PM's words "may have resonated" in post-war Britain, nearly sixty years on, every time in Prime Minister’s Questions that David Cameron tries to tell the British people that they’ve never had it so good, I fear it just prompts disbelief that he can be so out of touch.

George Eaton is political editor of the New Statesman.

Photo: Getty
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Brexiteers want national sovereignty and tighter borders – but they can't have both

The role of the European Court of Justice is a major sticking point in talks.

Why doesn't Theresa May's counter-offer on the rights of European citizens living and working in Britain pass muster among the EU27? It all comes down to one of the biggest sticking points in the Brexit talks: the role of the European Court of Justice.

The European Commission, under direction from the leaders of member states, wants the rights of the three million living here and of the British diaspora in the EU guaranteed by the European Court. Why? Because that way, the status of EU citizens here or that of British nationals in the EU aren't subject to the whims of a simple majority vote in the legislature.

This is where Liam Fox, as crassly he might have put it, has a point about the difference between the UK and the EU27, being that the UK does not "need to bury" its 20th century history. We're one of the few countries in the EU where political elites get away with saying, "Well, what's the worst that could happen?" when it comes to checks on legislative power. For the leaders of member states, a guarantee not backed up by the European Court of Justice is no guarantee at all.

That comes down to the biggest sticking point of the Brexit talks: rules. In terms of the deal that most British voters, Leave or Remain, want – a non-disruptive exit that allows the British government to set immigration policy – UK politicians can get that, provided they concede on money and rules, ie we continue to follow the directions of the European Court while having no power to set them. Britain could even seek its own trade deals and have that arrangement.

But the problem is that deal runs up against the motivations of the Brexit elite, who are in the main unfussed about migration but are concerned about sovereignty – and remaining subject to the rule of the ECJ without being able to set its parameters is, it goes without saying, a significant loss of sovereignty. 

Can a fudge be found? That the Article 50 process goes so heavily in favour of the EU27 and against the leaving member means that the appetite on the EuCo side for a fudge is limited. 

But there is hope, as David Davis has conceded that there will have to be an international guarantor, as of course there will have to be. If you trade across borders, you need a cross-border referee. If a plane goes up in one country and lands in another, then it is, by necessity, regulated across borders. (That arrangement has also been mooted by Sigmar Gabriel, foreign minister in Angela Merkel's government. But that Gabriel's centre-left party looks likely to be expelled from coalition after the next election means that his support isn't as valuable as many Brexiteers seem to think.)

On the Conservative side, a new EU-UK international body would satisfy the words of May's ECJ red line. On the EU27 side, that the body would, inevitably, take its lead from the treaties of the EU sans Britain and the ECJ would mean that in spirit, Britain would be subject to the ECJ by another name.

But it comes back to the Brexit dilemma. You can satisfy the voters' demand for non-disruptive control of British borders. You can satisfy political demand for sovereignty. But you can't have both. May – and whoever replaces her – will face the same question: who do you disappoint?

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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