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24 February 2011

Balls: extending the 50p rate is still an option

Is Ed Miliband about to fall out with another shadow chancellor?

By George Eaton

Since he became shadow chancellor, Ed Balls has remained supremely on-message. Labour’s Keynesian pitbull has kept to his promise to support Ed Miliband’s plan to halve the deficit in four years and has stopped warning of a double-dip recession.

But has the first crack now appeared? In an interview in the new issue of Progress, house journal of the Blairites, Balls refuses to rule out reducing the threshold for the 50p tax rate from £150,000 to £100,000. He tells the magazine: “Those are discussions that we still have to have . . . I think [my support for a £100,000 threshold] depends. It depends very much on where we are in the future.”

As I noted last month, Balls declared as much during his recent appearance on The Andrew Marr Show, but this is a far more unambiguous statement. Those Blairites who warned that he would drag Labour’s economic policy to the left will be troubled today.

Balls’s words also put him at odds with Miliband. The Labour leader supports a permanent 50p rate, although Alan Johnson’s presence saw a greater emphasis on merely retaining it “for this parliament”, but he has never publicly supported reducing the threshold to £100,000. By contrast, Balls, who supported a £100k starting rate during the Labour leadership election, is clearly a true believer in the policy.

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It’s worth noting that public opinion is on the shadow chancellor’s side. A Sunday Times/YouGov poll published on 30 January found that 33 per cent think the top rate should eventually be brought down, 49 per cent think it should be made permanent (the Miliband position) and 51 per cent would like to see the threshold brought down to £100,000, with 29 per cent opposed. Balls will also have been encouraged by last month’s bumper tax receipts, which suggest that the 50p rate may be raising more from PAYE taxpayers than first thought.

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But, whatever the merits of the policy, it’s troubling that Labour’s taxation policy remains this ambiguous. Why haven’t Miliband and Balls had this discussion yet? The party can’t afford a repeat of the confusion created by Johnson.