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16 September 2013

Clegg’s narrow victory on the 50p tax rate shows how divided the Lib Dems are

Lib Dem delegates voted by a majority of just four (224-220) not to pledge to reintroduce the 50p rate as Clegg and Farron divided.

By George Eaton

After his victories on nuclear power, tuition fees and ‘Osbornomics’, Nick Clegg’s winning streak has continued. In line with the leadership’s position, Lib Dem delegates have just voted not to reintroduce the 50p tax rate and to maintain the 45p rate, albeit by a margin of just four (224-220).

While party president Tim Farron had called in my interview with him for the party to back the higher rate both to raise additional revenue and to demonstrate that “we are all in it together”, Clegg said this morning: “To drive home the message of tax reform I think changing one very specific symbolic tax rate is not really the key part of the matter.” The key intervention in the debate came from Vince Cable, who reminded delegates that the party’s previous policy was to support a 40p rate alongside a mansion tax and argued that excessively high taxes on income could have negative economic effects.

Had the party voted to back the 50p rate it would have been an unambiguous assertion of its centre-left character, but the result will be seen as an acceptance of the more economically liberal path pursued by Clegg. (Although it is worth remembering that the party previously voted to abandon support for the 50p rate under Ming Campbell’s leadership in 2006.) But the narrowness of the victory shows how divided the Lib Dems remain about their ideological direction. While Orange Bookers such as David Laws and Jeremy Browne would probably like to see the top rate reduced to 40p, Farron and the party’s left have demonstrated the support that exists for a more social democratic approach.

Should the Lib Dems be presented with a choice of coalition partner after the next election, with both Labour and the Tories winning enough seats to form majority governments with their support, it is these two groups that will be pitted against each other in a battle for the party’s soul.

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