In the extensive previews of the “mini-Budget” the new Chancellor Kwasi Kwarteng held one thing back: scrapping the top rate of tax. This is the 45p paid on earnings over £150,000. Now the top rate will be 40p, meaning those earning over £50,271 pay the same rate as the highest earners.
There were gasps in the House of Commons chamber when this was announced: it was a decision emblematic of the Truss government’s commitment to trickle-down economics and the headliner of the biggest package of tax cuts since the 1970s.
It’s hardly a surprise, however. The idea that the rich (high-earning workers and profitable companies) should be allowed to keep more of their money is one Kwarteng and Liz Truss, the Prime Minister, have held dear throughout their political careers. It is their firm ideological belief that this will stimulate growth, which will then filter down to the rest of us swimming around in the economy.
It’s also not particularly revolutionary, despite the breathless headlines. The so-called “austerity chancellor”, George Osborne – who would have balked at the borrowing announced in this fiscal statement, the costs of which have not been announced – did the same thing in 2012. He cut the top rate from 50p to 45p, also at a time of economic strife for many in a post-crash economy subjected to deep cuts as a response to recession.
At the time it seemed wild, and a gift to the Labour Party. Duly, Ed Miliband, the opposition leader, pounced and accused the Conservative-led coalition of a “millionaires’ budget” and a “tax cut for millionaires”: a line that was used repeatedly for a while.
Labour will want to be wary of how it responds to Kwarteng’s repeat performance, however. That line didn’t work last time. Exclusive ongoing research by the New Statesman into public attitudes towards wealth, salary and class suggests voters are not as exercised about high pay and tax cuts for the rich as many on the left would like to believe. When you ask the general public if any salary or level of wealth is too high they demur, and even those earning below average consider themselves “normal”.
Rachel Reeves, the shadow chancellor, appeared to be aware of this delicate line, preferring in her response to play down the idea that the mini-Budget was some kind of “gamechanger”, as Kwarteng tried to spin it. She chose weariness over outrage.
After all, as she pointed out, it’s not exactly a “new plan” that reverses a very recent rise in National Insurance, cancels a corporation tax rise that hadn’t even come in yet, and brings forward a cut in income tax that was already planned. Even the stamp duty cut is a reheated idea from the Osborne years (he cut tax for 98 per cent of property purchases in 2014).
Yes, a tax cut for the highest earners when living standards are falling at the fastest level since the Fifties is an eye-catching bit of Tory trolling. But Labour mustn’t let it distract from what we are really looking at: a tired 12-year government gambling on recycled ideas.