The stupidity of the top rate tax cut

John Rentoul

pmqs132 300x163 The stupidity of the top rate tax cutDavid Cameron and George Osborne’s decision to cut the top rate of income tax in two months’ time seems ever more incomprehensible. If they had left the rate at 50p, which for all the difference 45p will make they might as well have done, Ed Miliband would have nothing to go on at Prime Minister’s Questions at all.

Today he decided to use all six questions on the “living standards crisis”, which is a way of asking the Prime Minister why people have less money in a recession. Miliband’s main point was that the Office for Budget Responsibility forecast is that average disposable income will still be lower in 2015 than it was in 2010. Which is what happens if a Government tries to balance the books, having inherited the biggest peace-time borrowing requirement.

Of course, Osborne was relying on growth resuming so that people would be at least a little better off by 2015 than they had been five years earlier, but Miliband does not really want to go into how growth might have been higher if the Government had borrowed more. So, instead of debating macro-economic policy, Miliband’s approach to PMQs is reduced to banal sound bites about the “cost of living” and repeating the phrase “out of touch” four times (it obviously tests well in the focus groups).

The only line that hurts at all is the “tax cut for millionaires”. Because of it, Miliband can say “but there is one group for whom the good times will come this April”. Because of it, he can talk of a “living standards crisis for the many”, while the few, including the Prime Minister, have it cushy. Never mind, as I said at the weekend, that the richest 10 per cent are bearing and will bear the greatest share of the burden of getting the deficit down, the symbolic cut in the top tax rate makes it impossible for Cameron and Osborne to be heard, let alone be believed.

Stupidy, stupidy, stupidy stupid, as George and Baldrick said in Blackadder.

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  • Nick Reid

    You’re only considering the UK political angle. What about the economic iimpact of rich foreigners choosing to move to or stay in UK ? 50p tax rate is higher than our western European peers and substantially higher than SE Asia/Middle East. If you earn £1m pa and have a choice of Hong Kong or London to be based then the 50p tax rate does make a difference.

  • Ezekiel

    I agree with Nick Reid. Good policy and good politics rarely mix and we shouldn’t criticize our officials when they decide not to take the easy way out.

  • Lewis James Brown

    It needed to be cut to make the UK competitive. The other commenters are correct. But it should have gone down to 40p – this was where it was under Labour. 40/45 makes no political difference – Miliband would have said much the same, but a 10p cut rather than 5p could have had a much greater positive supply-side effect.

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