Proudly trumpeting a tax cut for the rich. (Photo: Peter Macdiarmid)
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Budget 2015: The great tax giveaway to the rich masquerading as help for the poor

Raising the personal allowance does not help who it is supposed to.

There is no policy that George Osborne will trumpet more proudly than the increase in the personal allowance: evidence of a Conservative Party simultaneously helping the poorest and rewarding work.

Of course, the policy is a Liberal Democrat one. When Nick Clegg advocated the increase in the personal allowance during a TV debate five years ago, David Cameron said: “I would love to take everyone out of their first £10,000 of income tax, Nick...We cannot afford it.” The coalition has not just lifted the tax-free personal allowance to the Lib Dems’ target, but also exceeded it. Next month, the personal allowance will rise to £10,600 – and there are heavy hints that George Chancellor will today announced a further increase in the allowance in £11,000. In an era when voters are used to broken promises, the policy is a welcome antidote: an example of politicians under-promising and over-delivering.

The only problem, of course, is it does almost nothing to help those who the policy was designed for: those struggling on low incomes. "The UK’s five million lowest-paid employees will gain nothing at all," says Adam Corlett of the Resolution Foundation. Raising the personal allowance is useless for those earning less than £10,600, but much appreciated by the highest earners. Increasing the personal allowance to £12,500 would be worth £28 a year to the poorest 20 per cent of households, but £445 a year to the richest 20 per cent. It is a massive tax cut for the rich masquerading as substantive help for the poorest in society. And increasing tax on the poor is funding it. After today’s Budget, the total cost of increasing the personal allowance this Parliament will be about £14 billion – or about the same as the cost of the hike in VAT from 17.5 to 20 per cent, a tax that is as regressive as they come.

In a saner political climate, the coalition partners would be fighting to blame the increase on the personal allowance on each other, not to claim the credit. A policy that is superficially appealing when explained on the back of a cigarette packet is best left there.

Not that other parties have learned the lesson. Labour’s policy to cut tuition fees to £6,000 amounts to an annual £2.5 billion tax cut for City high-flyers, while doing nothing to improve access to universities. The problems with University policy are not £9,000 fees that you don’t pay back if you are not successful, but the derisory provision of maintenance grants and egregious fall in part-time and mature students. But these issues, critically important as they are, did not lead to effigies of Nick Clegg being burned, so Labour have calculated that there is less political gain to be had addressing them.

Even Ukip, those supposed purveyors of home truths, are as guilty of prioritising gimmickry over good policy. While their income tax proposals are couched in the language of helping the lowest earners, they would give an extra £1,143 a year to the richest 10 per cent – and just £35 to the poorest 10 per cent.

Tim Wigmore is a contributing writer to the New Statesman and the author of Second XI: Cricket In Its Outposts.

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Jeremy Corbyn has transformed Labour from resisting social movements to supporting them

The opposition's new leadership has brought about a historic shift in its relationship with social movements.

“Another world is possible,” declared John McDonnell last month in his first major speech as Labour’s new shadow chancellor. These four words show how Labour’s leadership views its relationship with activists and campaigners outside the Westminster system. The slogan is the motto of the World Social Forum, an annual alternative to the ultra-elite World Economic Forum, formed by social movements across the world to struggle against, and build alternatives to, neoliberalism.

How times change. In a speech given at the George Bush Senior Presidential Library in Texas, United States, in April 2002, Labour leader and British Prime Minister Tony Blair offered his support to the administrators of the global economy, not those demonstrating against them.

He said: “It's time we took on the anti-globalisation protestors who seek to disrupt the meetings international leaders have on these issues. What the poor world needs is not less globalisation but more. Their injustice is not globalisation but being excluded from it. Free enterprise is not their enemy; but their friend.”

In 2002, Labour’s leadership wanted to take on social movements. Now, it intends to engage with and support them. “The new kind of politics” of Labour’s new leader, Jeremy Corbyn, is about more than focusing on issues over personalities and (anti-) presentational changes.

It is also “a new politics which is based on returning the Labour party to its roots. And the roots of the Labour party was as a social movement, representing the vast majority of working people in this country,” as McDonnell, Corbyn’s closest political ally, explains to the New Statesman.

Campaigners outside of the Labour party are excited. John Hilary, executive director of War on Want, a campaigning anti-poverty NGO, tells the New Statesman, “there’s a really positive impulse to the Corbyn/McDonnell leadership reaching out” to social movements. For Hilary, the immediate policy changes on TTIP – the EU-US investor rights, regulation harmonisation and non-tariff barriers deal negotiated behind closed doors – and a Financial Transaction Tax have already sent “a message to a disenfranchised part of the electorate that Labour is back”.

But, for the campaigners outside of the Labour party, this moment is not without risks. Political parties have a long record of crushing the autonomy of social movements.

“It’s important they aren’t incorporated or have to work on the terms of the political system. It’s a matter of a respectful relationship,” explains Hilary Wainwright, a political activist and founder and co-editor of Red Pepper magazine. Wainwright argues for “close engagement [between Labour and outside campaigners] that isn’t a bossy dominating one. One that seeks to collaborate, not govern”.

McDonnell agrees. “The most important thing,” he says, “is that all of the campaigns and social movements that are campaigning at the moment and those that will campaign in the future, need to maintain their autonomy from government and political parties. We respect that . . . Otherwise, we’ll undermine their vitality and their independence.”

To remain “strong, independent and radical” is “the most helpful” campaigners can be to Labour’s leadership, according to Hilary. Labour’s leadership “don’t look to us to make the sort of political compromises that they might have to do in order to hold a much broader spectrum of people together. What we can do best is hold that line as we believe it be right and support the Labour leadership in taking a line as close as possible to that”, he says.

The task for social movements and campaigners outside of the party is “to show how there will be popular support for radical and principled positions”, according to Hilary.

To win in 2020, Labour will “bring together a coalition of social movements that have changed the political climate in this country and, as a result of that, changed the electoral potential of the Labour Party as well”, says McDonnell. For Labour’s shadow chancellor, the people's views on issues are complex and fluid rather than static, making the job of politicians to bump up as close to them as possible.

Movements can help shift political common sense in Labour’s direction. Just as UK Uncut placed the issue of tax avoidance and tax justice firmly on the political map, so too can other campaigners shift the political terrain.

This movement-focused perspective may, in part, explain why the Corbyn campaign chose to transform itself last week into the Momentum movement, a grassroots network open to those without Labour membership cards. This approach stands in contrast to Blair’s leadership campaign that evolved into Progress, a New Labour pressure group and think tank made up of party members.

In order to allow movements the space to change the terms of the debate and for Labour to develop policy in conjunction with them, the party needs “to engage with movements on their own terms”, according to Wainwright. This means “the party leadership need to find out where people are struggling and where people are campaigning and specifically work with them”, she continues.

McDonnell says it will. He says Labour “want to work alongside them, give them a parliamentary voice, give them a voice in government but, more importantly, assist them in the work that they do within the wide community, both in meetings, demonstrations and on picket lines”.

This position is not one you would expect from McDonnell’s five more recent predecessors: Chris Leslie, Ed Balls, Alan Johnson, Alistair Darling, Gordon Brown. So, “this may seem like a unique moment if you’re looking just within the British context. But, if you look outside Britain it’s actually much more in touch with movements in many places in the world”, says Hilary.

He adds: “Political parties are going to have to have much more honest engagements between parliamentary politics and the social movement hinterland. For us, it just means that in a wonderful way, Britain is catching up with the rest of the world.”

McDonnell too sees this shift in how Labour engages with movements as “a historic change that modernises the Labour party”.

But, perhaps for Labour, this is a recurrence rather than a transformation. The party grew out of Britain’s biggest social movement: the unions. Labour’s new leadership’s openness to campaigners “modernises it by taking it back to being a social movement again”, says McDonnell.