“The rich will pay a greater share of tax”

Ed Miliband saved David Cameron by making an acclaimed speech to which the Prime Minister was forced to respond. That is the gist of my column for The Independent on Sunday today, and coincidentally a theme also explored by Matthew d’Ancona in The Sunday Telegraph and by Andrew Rawnsley in The Observer.

One of the most interesting features of Cameron’s speech (on which I commented here and here) was that it responded directly, at last, to criticism of the tax cut for the rich, announced in March to take effect next April.

There was the knockabout, making fun of Miliband’s implication that a tax cut is the government giving some of its money to the taxpayer, but there was a serious point, which George Osborne also made in his speech, but which attracted little attention: “The rich will pay a greater share of tax in every year of this Parliament than in any one of the 13 years under Labour.”

I am sure that this is right, if only because the 50p top income tax rate came in just weeks before the 2010 election, and the 45p rate will continue to raise substantial sums from the better off. (There have also been changes to Capital Gains Tax, stamp duty and higher-rate reliefs that are highly progressive, and enough to offset the regressive effect of the VAT rises.) But I would like to see the Treasury numbers on which this claim is based. I have asked the Conservative Party press office for them, but no answer yet.

The brilliant Jonathan Portes at the National Institute for Economic and Social Research has had a look at some of the data it holds and estimates that the share of total taxes paid by the 10 per cent of the population with the highest incomes has risen from about 25 per cent in 1997 to around 28 per cent now.

The nearest I can find in official documents to the information needed is table B5 in the Budget Red Book, which shows the estimated effect of tax and benefit changes between 2010/11 and 2014/15 by fifths of the income distribution (the tax changes alone are in pale grey).

I will enquire of the Institute for Fiscal Studies tomorrow, and will update when I hear back from the Conservatives.

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• http://www.facebook.com/cowanbill Bill Cowan

  Aye, and the meek shall inherit the earth.

• creggancowboy

  And Giovanni will be double jobbing.

• 12758

  “…the share of total taxes paid by the 10 per cent of the population with the highest incomes has risen from about 25 per cent in 1997 to around 28 per cent now.”

  My first reaction is that I suspect that it’s due to the bottom 90% seeing their income fall, with many earning too little to pay tax. If you end up with the bottom 90% on minimum wage then the top 10% will be paying the overwhelming majority of tax. That is no cause for celebration, however that is direction we are headed.

• http://twitter.com/francessmith frances smith

  yes.

• http://twitter.com/francessmith frances smith

  i just want to agree with what 12758 has said. the question of the share of total tax paid by the richest 10% is meaningless unless it is related to the share of total income and wealth, and the changes over time.

• http://twitter.com/JohnRentoul John Rentoul

  I don’t think so. What evidence there is is that the income of the better-off has fallen more than the rest. I know it seems surprising.

• 12758

  The evidence I have comes from a US study by Paul Buchheit, from DePaul University. I don’t think the UK will be significantly different. He writes, “From 1980 to 2006 the richest 1% of America tripled their after-tax percentage of our nation’s total income, while the bottom 90% have seen their share drop over 20%.” Robert Freeman added, “Between 2002 and 2006, it was even worse: an astounding three-quarters of all the economy’s growth was captured by the top 1%.”

• Pacificweather

  You asked the Conservative press office for the Treasury figures? Why did you not ask the Treasury or even PWC who gave them the figures?