Boris Johnson and George Osborne at the Tate Modern on 20 February, 2015. Photograph: Getty Images.
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Boris has outflanked Osborne on the living wage and the top tax rate

The Conservative leadership rival's alternative Budget offers something for the left and the right. 

The next Conservative leadership contest has begun. Not every move that the contenders make should be viewed through this prism. But it is an inescapable reality that one of them will succeed David Cameron before the end of this parliament. 

In the first all-Conservative Budget since November 1996, George Osborne has an opportunity to raise his stock among his party by reducing the top rate of tax from 45p to 40p (as 160 Tory MPs have demanded). The absence of the Liberal Democrats from the government frontbench means that Osborne, one Conservative tells me, has "no excuse not to act". But in his interview with Andrew Marr yesterday, the Chancellor signalled that he does not intend to use his political freedom to cut the top rate on Wednesday. He emphasised that his "priority" was to deliver to "the promises upon which we were elected" (of which a cut in the top rate was not one): a £12,500 personal allowance and a £50,000 40p tax threshold. Osborne appears to have wisely concluded that it would be dangerously incongruous to also reduce taxes for the top 1.5 per cent of earners while austerity (such as tax credit cuts) continues elsewhere. 

The Chancellor was also notably lukewarm towards the argument that more companies should pay the living wage to compensate those whose in-work benefits will be reduced (as former No. 10 adviser Steve Hilton has recently proposed). He said that "the best answer" to this conundrum was to cut taxes and "to make sure your businesses are growing and profitable and that they can pay good salaries". At no point did he endorse the argument made by the left and, increasingly, the right that cheapskate corporations are denying their workers the pay they deserve.

In private meetings, I'm told, Osborne has consistently dismissed those (such as Jo Johnson, the universities minister and the author of the Conservative manifesto) who suggested that the Tories should annex Labour's policy of providing tax breaks to companies who raise salaries to living wage level. To him, this is statist meddling based on the false premise that firms who can afford to pay more aren't. As the Resolution Foundation's Gavin Kelly writes in an essential blog: "Perhaps the biggest misconception is the voguish notion that if tax credits are cut, employers will somehow decide to offer pay rises to fill the gap. This is saloon-bar economics espoused by some on both left and right. The available evidence suggests that the great majority of the gains from tax credits flow through to employees, not employers."

It is significant, then, that Osborne's most formidable rival for the Conservative leadership, Boris Johnson, has used his pre-Budget Telegraph column to advocate the changes the Chancellor has refused to offer (for now): a cut in the top rate of tax and the expansion of the living wage. The latter is proposed as political cover for the former: "We think of ourselves according to our relationship with others – and it is simply not fair that a Budget should put more disposable income in the pockets of the rich and less disposable income in the pockets of the poor. And that, alas, would be the result if we were to cut top-rate tax and simultaneously to cut in-work benefits without any compensating improvements in pay." Unlike Osborne, the Mayor of London contends that firms are using tax credits to artificially supress wages: "As for low pay, it isn’t a function of market forces. It’s being propped up by the taxpayer. That needs to end. And that means business has got to start paying its people a wage they can live on." 

It is an appealing pitch that offers something to both the right (a cut in the top rate) and the left (the living wage) of the Conservative Party. The Mayor has cast himself as a "one nation" figure more capable of performing the political gymnastics required to deliver free market policies. Unless Osborne surprises on Wednesday, Johnson's alternative Budget will retain political potency. 

George Eaton is political editor of the New Statesman.

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The SNP thinks it knows how to kill hard Brexit

The Supreme Court ruled MPs must have a say in triggering Article 50. But the opposition must unite to succeed. 

For a few minutes on Tuesday morning, the crowd in the Supreme Court listened as the verdict was read out. Parliament must have the right to authorise the triggering of Article 50. The devolved nations would not get a veto. 

There was a moment of silence. And then the opponents of hard Brexit hit the phones. 

For the Scottish government, the pro-Remain members of the Welsh Assembly and Sinn Féin in Northern Ireland, the victory was bittersweet. 

The ruling prompted Scotland’s First Minister, Nicola Sturgeon, to ask: “Is it better that we take our future into our own hands?”

Ever the pragmatist, though, Sturgeon has simultaneously released her Westminster attack dogs. 

Within minutes of the ruling, the SNP had vowed to put forward 50 amendments (see what they did there) to UK government legislation before Article 50 is enacted. 

This includes the demand for a Brexit white paper – shared by MPs from all parties – to a clause designed to prevent the UK reverting to World Trade Organisation rules if a deal is not agreed. 

But with Labour planning to approve the triggering of Article 50, can the SNP cause havoc with the government’s plans, or will it simply be a chorus of disapproval in the rest of Parliament’s ear?

The SNP can expect some support. Individual SNP MPs have already successfully worked with Labour MPs on issues such as benefit cuts. Pro-Remain Labour backbenchers opposed to Article 50 will not rule out “holding hands with the devil to cross the bridge”, as one insider put it. The sole Green MP, Caroline Lucas, will consider backing SNP amendments she agrees with as well as tabling her own. 

But meanwhile, other opposition parties are seeking their own amendments. Jeremy Corbyn said Labour will seek amendments to stop the Conservatives turning the UK “into a bargain basement tax haven” and is demanding tariff-free access to the EU. 

Separately, the Liberal Democrats are seeking three main amendments – single market membership, rights for EU nationals and a referendum on the deal, which is a “red line”.

Meanwhile, pro-Remain Tory backbenchers are watching their leadership closely to decide how far to stray from the party line. 

But if the Article 50 ruling has woken Parliament up, the initial reaction has been chaotic rather than collaborative. Despite the Lib Dems’ position as the most UK-wide anti-Brexit voice, neither the SNP nor Labour managed to co-ordinate with them. 

Indeed, the Lib Dems look set to vote against Labour’s tariff-free amendment on the grounds it is not good enough, while expecting Labour to vote against their demand of membership of the single market. 

The question for all opposition parties is whether they can find enough amendments to agree on to force the government onto the defensive. Otherwise, this defeat for the government is hardly a defeat at all. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.