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15 March 2010

The cabinet battle over 50p tax

The new dispute between Balls and Mandelson and why it matters for Labour's future.

By George Eaton

Today’s Daily Mail reports that Ed Balls and Yvette Cooper are pushing Alistair Darling to reduce the salary threshold for the new 50p tax rate from £150,000 to £100,000 in this month’s Budget.

The Schools Secretary and his wife previously called for this change ahead of last November’s pre-Budget report, but found themselves outmanoeuvred by Peter Mandelson.

This latest dispute is likely to increase the tension between those, such as Mandelson, who view the new tax rate as temporary and regrettable and those, such as Balls, who view it as permanent and desirable.

Unlike the Business Secretary, who believes that it would be madness for Labour to vacate the centre ground, Balls believes that the times call for an unambiguously left-of-centre approach. It’s a preview of the sort of the debate we can expect to see in any future leadership contest.

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The Blairite wing of the party (at least what’s left of it) will argue that any short-term political advantage to be gained from moving to the left is outweighed by the risk of permanently alienating “aspirational” voters. Meanwhile, Balls (who is certain to run) will point to polls suggesting that the 50p tax rate as well as the bonus tax are among the most popular things Labour has done.

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Should Darling agree to widen the 50p band in the Budget, it will be first blood to Balls in the battle for Labour’s ideological soul.

PS: The potential expansion of the 50p rate is another elephant trap we can expect David Cameron (much to Boris Johnson’s consternation) to avoid easily.

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