I win 50p
The cut in the top rate of income tax from 50p in the pound to 45p, announced in 2012 and taking effect last year, was one of the big mistakes David Cameron and George Osborne made. That does not mean, however, that Ed Balls’s announcement last weekend that a Labour government would put the rate back up would do the opposition any good.
I have already collected my winnings from Dan Hodges, my fellow zombie Blairite, who bet me (50p, of course) that, even though he didn’t like the policy, Labour would get a short-term boost from Balls’s announcement.
I, on the other hand, think it right that the top rate should stay at 50p for as long as the fiscal emergency lasts. I accept that the importance of the rate is mostly declaratory, because the difference between 45p and 50p raises very little. But it is so important that the better-off both bear the brunt of balancing the books and be seen to be doing so that a little short-term sub-0ptimal economics is in order.
But I didn’t think that confirming the policy would move public opinion, and so it has proved. Partly, this is because Labour clobbering the rich was already in the market. The opinion polls already reflected people’s assumption, whether they agreed with it or not, that Labour wanted to tax the better-off more.
And partly it was because, no matter how popular the policy seems if you ask a simple opinion-poll question, attitudes are more complicated. My esteemed colleague Andrew Grice, in The Independent yesterday,* and my esteemed former colleague Peter Kellner, in The Sunday Times today (pay wall), explain why.
So the 50p rate is the right policy, but, if you think as Hodges and I both do that being six points ahead at this stage is nowhere near enough for Labour to win, it is no help in gaining those extra voters that Ed Miliband needs to offset the ones he is going to lose over the next 15 months.
*I think Grice has one historical detail wrong. He says that Gordon Brown wanted to impose a top rate of 50p in 1997. As I recall the debate, in which Tony Blair told Ed Balls to “wash your mouth out with soap”, it was over whether to keep open the option of such a rate in the future. Blair wanted to make the promise that the top rate would stay at 40p – a promise that Brown needlessly broke 30 days before the 2010 election.Tagged in: 50p rate, 50p tax
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