Labour’s summer offensive (contrasting with what one shadow minister describes as last year’s “summer of silence”) continues today with a speech by Ed Balls on the economy in the bellwether seat of Bedford.
Balls will reveal new figures from the House of Commons Library showing that by 2015, average earnings will have fallen by the highest amount since the 1874-1880 parliament. In addition, based on current trends, this parliament will be the first since the 1920s in which real earnings have been lower at the end than at the beginning. It’s a reminder that, however fast the economy grows, Labour will still be able to go into the general election answering Ronald Reagan’s question – “Are you better off than you were four years ago?” – in the negative. “From a Conservative-led government that promised to make working people better off back in 2010, this is a dismal record of failure,” Balls will say.
But the most notable political line is on tax. After the success that Labour enjoyed in attacking the coalition’s abolition of the 50p tax rate (“the millionaire’s tax cut”) in 2012, Balls will warn that the Tories are prepared to do it all over again.
“We know the Tories’ real economic plan – it’s to cut taxes at the top and hope that wealth will just trickle down,” he will say.
“Having already cut taxes for millionaires in this Parliament, they’re champing at the bit to do it again if they win the election – cutting the top rate of tax for people earning over £150,000 again from 45p to 40p. Another tax cut worth £3 billion for the richest one per cent of our country.
“We know George Osborne wanted to cut it down to 40p in his omnishambles Budget two years ago. David Cameron won’t rule out doing it. And Boris Johnson and the right are now demanding it. This is the real Tory agenda for a second term. The same old Tories standing up for the few, while everyone else is left behind. And it shows just how much is at stake next year.”
There is a simple reason why Osborne and Cameron have conspicuously failed to rule out scrapping the 45p rate: they think it would be a good idea. But whatever economic justification they can offer for this stance (and there is no evidence that a tax rate of 45p, or, indeed, one of 50p is harmful to growth), it is terrible politics. As a recent YouGov poll showed, the public overwhelmingly support the 50p rate, with 61 per cent in favour and just 26 per cent opposed. By 45 per cent to 19 per cent, they believe it will help the economic recovery rather than damage it, and, by 50 per cent to 29 per cent, that it will raise additional revenue.
Osborne is often accused of being solely influenced by political calculations, but on this issue he is allowing ideology to trump all.
Update: In his speech, Balls again warned that the government’s failure to increase housing supply meant there was now “a real risk that interest rates will rise prematurely” to rein in the market.
Speaking in Bedford, where Harold Macmillan first declared in 1957 “you’ve never had it so good”, he also said that while the Tory PM’s words “may have resonated” in post-war Britain, nearly sixty years on, every time in Prime Minister’s Questions that David Cameron tries to tell the British people that they’ve never had it so good, I fear it just prompts disbelief that he can be so out of touch.