Not as progressive as he likes to make out. Photo: Getty Images
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How does Labour move on from tax and spend?

Voting against further increases to the personal allowance would expose George Osborne's rhetoric for what it is.

Last week saw publication of the Conservative Government’s first Finance Bill. It’s through the Finance Bill that the Tories will give legal form to the tax measures announced in their Summer Budget.

And they make an ignominious start. True, they never promised us a Rose Garden. But, I beg your pardon, the Conservative Manifesto did promise not to increase rates of income tax. And the very first clause of that very first Bill breaks that promise by busting the ‘Tax Lock’ to permit a 7.5 per cent increase in income tax paid on dividends.

Nor was this the only tax promise to fail to survive the nine weeks from General Election to Summer Budget. The Tories also pledged to “increase the annual tax charges paid by those with non-domiciled status, ensuring that they make a fair contribution to reducing the deficit.” But the Budget gave us no increase in the annual charges. Instead we have some fairly modest changes which will remove the benefit of the status from those unlikely to have been entitled to claim it in the first place.

But, “over-firm” though the Manifesto commitments may be revealed to be, and with a second reading today, the task before Labour is to work out before the Committee stages in September where it stands on the Finance Bill measures.  

I’ll offer some thoughts in the coming days.

And I’ll assume Labour wants to shrug off the clothing of tax and spend and ask, instead, how it might wear its new garb whilst enhancing Labour values?  To do so is to accept, for the time being at least, the Conservatives’ narrative around the ‘right’ size of the state. Revisiting that question can await another day.

The first measure Labour should oppose is the proposed rise in the personal allowance.

Cameron spoke last month on the need to end the merry-go-round of “people working on the minimum wage having that money taxed by the government and then the government giving them that money back – and more – in welfare.”

But raising the personal allowance is medicine that gets nowhere near where the trouble is. There are several reasons why this is so. But most important: however high you raise the personal allowance, employers still have to deduct tax on income – in the form of National Insurance contributions – and pay it over to government.

As things stand, someone on minimum wage could work 31 hours a week before she had to start paying income tax. But she could only work 23 hours before paying National Insurance contributions.

If you really want to end the “ridiculous merry-go-round” you don’t focus on income tax which kicks in at 32 hours but on National Insurance contributions which kick in at 24 hours.

It’s just the wrong solution.

Raising the personal allowance is terrible policy for other reasons too.

It’s regressive: the lowest earning 46 per cent of adults already earn too little to pay income tax. Raising the personal allowance does nothing to help them. Indeed, those who presently benefit most in cash terms are, as IFS has identified, the second richest decile in the income distribution.

With the lower half of the adult income distribution already outside income tax the scope for helping the poorest through the tax system is limited. Tax credits are the sharpest way to target help at those who need it most. If, for reasons of ideology, you’ve discarded them from your tool box you’re left with blunter instruments. But here are two.

Council tax is highly regressive. In 2013/14, even net of Council Tax Support, it represented a staggering 13.5 per cent of the earnings of the poorest 20 per cent of households and only 1.9 per cent of the richest (source ONS) (6.4 per cent/4.3 per cent/3.1 per cent for intermediate quintiles). The case for spending part of that £4bn a year cost of raising the personal allowance to £12,500 on reducing this unfairness makes itself.

Compelling, too, although better understood, is the argument, already made above, for raising the level at which workers become liable to pay National Insurance contributions. If you spend that £4bn on raising the point at which you start to pay 12 per cent National Insurance contributions you can benefit those in work who earn £8,060 and above, reaching much further down the income distribution curve. Then you really will start to get people off the roundabout.

Of course, whatever you propose, the reality is that the Tories will press ahead, regardless, with increasing the personal allowance. And it is far, far too early to begin to formulate manifesto policies for 2020. But even at this stage in the electoral cycle there is work to be done in exposing the reality of Osborne’s One Nation rhetoric: a suite of tax policies which do nothing for the poorest and distribute their fruits to those who need them least. 

Jolyon Maugham​ is a barrister who specialises in tax. He advised the Labour party on tax policy, and blogs regularly on taxation here.

Jolyon Maugham is a barrister who advised Ed Miliband on tax policy. He blogs at Waiting for Tax, and writes for the NS on tax and legal issues. 

Photo: Getty
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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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