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26 January 2014

How the Lib Dems and others changed their tune on the 50p tax rate

Danny Alexander and former M&S boss Stuart Rose attacked Labour yesterday, but they used to insist that the top rate should remain in place.

By George Eaton

Labour’s promise to reintroduce the 50p tax rate was not just an attempt to prove that the party is committed to deficit reduction but also to set a political trap for the Conservatives. By rushing to quote businessmen opposed to the policy, the Tories have walked into it. Rarely in recent months have they looked more like the party of the rich. Meanwhile, the public (as ever) overwhelmingly support the measure. A poll for the Mail on Sunday found 60 per cent of voters in favour, with just 17 per cent opposed.

Many of those criticising the proposal have long argued against it (and often against progressive taxation of any kind) but it’s worth noting a few who have changed their tune. Former M&S boss Stuart Rose, the chairman of Ocado, said yesterday that the 50p rate would “put at risk all the good work that has been done to put the economy back on track”. But back in 2011, before George Osborne abolished it, he said: “I don’t think that they should reduce the income tax rate. How would I explain to my secretary that I am getting less tax on my income, which is palpably bigger than hers, when hers is not going down? If, in the short term, a case was made for me to pay more than 50 per cent tax, which would help UK plc, I personally – Stuart Rose – would be prepared to pay more tax.” Since austerity is going to continue for the entirety of the next parliament, it is hard to see how he can justify this volte-face.

Then there’s the Lib Dems. In response to Ed Balls’s announcement, Danny Alexander said: “Labour’s hypocrisy on taxation is breathtaking. In government they left a system full of loopholes for the wealthy to exploit. Thanks to our action in government to raise capital gains tax, reduce pensions tax relief for the wealthiest and tackle tax avoidance, Lib Dems in government are raising more from those who have the most and making Britain more competitive. Reintroducing the 50p rate wouldn’t help with either objective.”

But before the 2012 Budget, he said repeatedly that the 50p rate should only be scrapped if a mansion tax was introduced. In July 2011, he told The Andrew Marr Show: “The idea that we’re going to somehow shift our focus to the wealthiest in the country at a time when everyone’s under pressure is just in cloud cuckoo land”. No mansion tax was introduced, vetoed by David Cameron on the grounds that “our donors will never put up with it”, but the 50p rate still went.

Alexander will no doubt point out that the current top rate of 45p is higher than that seen for all but one month of Labour’s 13 years in office. But this still doesn’t explain why it was right to reduce it. Ed Miliband, who has hardly made a secret of his disagreements with the last government’s approach, can now argue that only Labour (which would also introduce a mansion tax) is committed to ensuring that the rich bear their fair share of austerity.

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