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Leader: Lessons for Labour from an Essex Tory MP

Robert Halfon's call for the reinstatement of the 10p income-tax band could be a winning idea for Miliband.

Rarely in recent history has the Conservatives’ self-image as the natural party of government seemed less appropriate. Unappeased by David Cameron’s promise of a referendum on Britain’s membership of the EU, Tory MPs have taken to plotting and scheming against the Prime Minister even as his poll ratings remain better than those of his party.

The same malcontents went on to vote against same-sex marriage in greater numbers than in favour of it, sabotaging a rare opportunity for Mr Cameron to prove that his party had changed. This is not the party of “modern, compassionate” Conservatism that he promised to build when he was elected leader in 2005.

Faced with the compromises of coalition, Tory MPs remain aggrieved by Mr Cameron’s failure to win a majority against an enfeebled Labour Party in 2010. Yet their belief that he did so because he was insufficiently Conservative is delusional. The party remained untrusted by public-sector workers, by northerners and Scots and, most notably, by ethnic minorities, just 16 per cent of whom voted Conservative.

Yet beyond the party’s revanchist wing there are Conservatives beginning to think hard about how they can avoid a similar failure in 2015. One of them is Robert Halfon, the MP for Harlow, one of the Essex new towns built after the war. Elected in 2010 at the third time of trying (he lost the bellwether constituency by just 97 votes in 2005), Mr Halfon recognises that, in order to win a majority, the Tories must attract more low-income and working-class voters and that to do so the party must focus relentlessly on reducing the cost of living.

His perspective is shaped by the Essex constituency he represents, where most voters earn less than the national median wage and where 30 per cent live in social housing. He led the successful campaign for a freeze in fuel duty and, in an insightful pamphlet, Stop the union-bashing, called for the Conser­vatives to end their hostility towards trade unions, “the very core of the Big Society”, and to offer free party membership to all union members.

In anticipation of the Budget on 20 March, Mr Halfon has made his most audacious proposal yet. The MP is calling for the reinstatement of the 10p income-tax band infamously abolished by Gordon Brown in his valedictory Budget in 2007. After trying and failing to persuade George Osborne not to scrap the 50p top income-tax rate (“At a stroke, it would allow our opponents to re-characterise the Conservatives as being the party of the rich,” he wrote presciently in an article for ConservativeHome in October 2011), Mr Halfon argues that his party must show that it is “not just interested in tax cuts for the rich”.

He would restore the 10p tax band for earnings between the personal allowance, which will rise to £9,440 in April, and £12,000, a measure worth £256 to basic-rate taxpayers. Displaying the kind of political astuteness that Mr Osborne has recently lacked, he has proposed meeting the £6bn-a-year cost of the policy by ring-fencing revenue from the 45p top rate of tax in an explicit act of redistribution. The Treasury, unsurprisingly, is beginning to take an interest.

Mr Halfon is right to seek to reduce the tax burden for low earners. Since the removal of the 10p tax rate, individuals pay a de facto marginal rate of 32 per cent (20 per cent income tax and 12 per cent National Insurance) on all earnings above the personal allowance. This, combined with VAT of 20 per cent, record petrol prices, ever-rising train fares and pension contributions and, for young people, student loan repayments, has squeezed real incomes at a rate unknown at any other point in modern times.

Ed Miliband, to his credit, was quicker to highlight this phenomenon than either his Conservative or Liberal Democrat counterparts. But while speaking encouragingly of how a Labour government could widen payment of the living wage, for instance by making it a condition of public-sector contracts, he has had little to say about reducing the tax burden. True, Labour has proposed a reduction in VAT from 20 per cent back to 17.5 per cent but as a stimulus measure this would, by definition, be temporary. With economic conditions so volatile, Mr Miliband is right not to commit to expensive tax cuts at this stage of the electoral cycle. But he should begin to offer voters some indication of his direction of travel.

In an interview with the New Statesman last year, the Labour leader rightly observed that “people are out of love with an uncontrolled market but they’re certainly not in love with a remote state”. By refusing to countenance tax cuts for low and middle earners (we consider National Insurance to be a form of income tax), Mr Miliband is in danger of reverting to statist type. In the lead-up to an election that will be defined by the issue of living standards, Labour must begin work now on a range of measures to ease the burden on low-income families – and it could do worse than seek to learn from Mr Halfon.

This article first appeared in the 11 February 2013 issue of the New Statesman, Assange Alone

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How can Britain become a nation of homeowners?

David Cameron must unlock the spirit of his postwar predecessors to get the housing market back on track. 

In the 1955 election, Anthony Eden described turning Britain into a “property-owning democracy” as his – and by extension, the Conservative Party’s – overarching mission.

60 years later, what’s changed? Then, as now, an Old Etonian sits in Downing Street. Then, as now, Labour are badly riven between left and right, with their last stay in government widely believed – by their activists at least – to have been a disappointment. Then as now, few commentators seriously believe the Tories will be out of power any time soon.

But as for a property-owning democracy? That’s going less well.

When Eden won in 1955, around a third of people owned their own homes. By the time the Conservative government gave way to Harold Wilson in 1964, 42 per cent of households were owner-occupiers.

That kicked off a long period – from the mid-50s right until the fall of the Berlin Wall – in which home ownership increased, before staying roughly flat at 70 per cent of the population from 1991 to 2001.

But over the course of the next decade, for the first time in over a hundred years, the proportion of owner-occupiers went to into reverse. Just 64 percent of households were owner-occupier in 2011. No-one seriously believes that number will have gone anywhere other than down by the time of the next census in 2021. Most troublingly, in London – which, for the most part, gives us a fairly accurate idea of what the demographics of Britain as a whole will be in 30 years’ time – more than half of households are now renters.

What’s gone wrong?

In short, property prices have shot out of reach of increasing numbers of people. The British housing market increasingly gets a failing grade at “Social Contract 101”: could someone, without a backstop of parental or family capital, entering the workforce today, working full-time, seriously hope to retire in 50 years in their own home with their mortgage paid off?

It’s useful to compare and contrast the policy levers of those two Old Etonians, Eden and Cameron. Cameron, so far, has favoured demand-side solutions: Help to Buy and the new Help to Buy ISA.

To take the second, newer of those two policy innovations first: the Help to Buy ISA. Does it work?

Well, if you are a pre-existing saver – you can’t use the Help to Buy ISA for another tax year. And you have to stop putting money into any existing ISAs. So anyone putting a little aside at the moment – not going to feel the benefit of a Help to Buy ISA.

And anyone solely reliant on a Help to Buy ISA – the most you can benefit from, if you are single, it is an extra three grand from the government. This is not going to shift any houses any time soon.

What it is is a bung for the only working-age demographic to have done well out of the Coalition: dual-earner couples with no children earning above average income.

What about Help to Buy itself? At the margins, Help to Buy is helping some people achieve completions – while driving up the big disincentive to home ownership in the shape of prices – and creating sub-prime style risks for the taxpayer in future.

Eden, in contrast, preferred supply-side policies: his government, like every peacetime government from Baldwin until Thatcher’s it was a housebuilding government.

Why are house prices so high? Because there aren’t enough of them. The sector is over-regulated, underprovided, there isn’t enough housing either for social lets or for buyers. And until today’s Conservatives rediscover the spirit of Eden, that is unlikely to change.

I was at a Conservative party fringe (I was on the far left, both in terms of seating and politics).This is what I said, minus the ums, the ahs, and the moment my screensaver kicked in.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.