50p tax rate and Tory triumphalism

Widely-circulated predictions that George Osborne is about to announce the end of the 50p top income tax rate for those earning more than £150,000 have attracted much comment.  The obvious one is fury at the naked unfairness – here is a handout to the wealthiest in society that comes at the same time that those on the lowest incomes are seeing their living standards cut (for example the estimated 900,000 people on low incomes who will lose nearly £4000 per year due to changes in tax credits in April).

Then there are also concerns about the economic justification. There’s no real evidence that this will do anything to stimulate the economy; this looks like a case for the confidence fairy if ever there was one.  Moreover, macroeconomic theory suggests that increasing the incomes of the poorest is much more likely to stimulate the economy, as they spend all (or nearly all) their income; cutting tax for the lowest-paid, or increasing public expenditure is a far more effective stimulus.  And there’s  the Treasury spinning of the figures  – in the absense of any hard numbers for tax take, claiming that the 50p tax rate is raising “hundreds of millions rather than billions” despite predicting that it would raise £3 billion per year (with tax expert Richard Murphy arguing convincingly that the take could be as high as £6 billion – the TUC paper to which that article links is essential reading).  At a time when benefits and services for the poorest and most vulnerable are being slashed in the name of deficit reduction, it’s an astonishing policy – a naked, obvious wealth grab on behalf of the wealthiest paid for by the poor and those on middle income, at a time when Coalition rhetoric still claims that we are “all in it together”.

And it’s a sign of Tory self-confidence and triumphalism.  I wonder whether the the events of last weekend’s Liberal Democrat conference were on Osborne’s mind as he contemplated the policy – a conference voting in two different ways on the NHS as their MPs and Peers prepared to trip happily through the Parliamentary division lobbies in support of a bill that effectively breaks up our National Health Service.  Perhaps he was reading the opinion polls, which showed that even when presiding over economic policies that have eviscerated the living standards of the vulnerable, hit Middle-England hard and enriched the 1%, or when presiding over the effective privatisation of Britain’s once-beloved NHS, the Tories are only a few percentage points behind Labour (with the added advantage that boundary changes and the deserved collapse of Liberal Democrat support will, in terms of seats in the House of Commons, greatly benefit the Tories).  Or perhaps the decisive moment was when Ed Balls signalled the raising of the white flag on economic policy, implicitly accepting the neoliberal economic agenda by effectively backing tax cuts.

Every one of these represents a Westminster political culture in which the Tories are utterly dominant.  Of course there is opposition outside the political class – all the evidence suggests that Coalition policies on health, on tax, on public expenditure are widely unpopular, although one of the most sordid aspects of the Coalition’s tenure has been its casual demonisation of the disabled, the sick and the vulnerable who depend on benefits.  But that is outside the Westminster bubble – and one can hardly avoid the conclusion that nearly all the most obnoxious aspects of Coalition policy – NHS privatisation, benefit cuts, workfare, tuition fees, the privatisation of public space – are simply the policies that Labour followed in office taken to their logical conclusion.  Ed Miliband wrote the 2010 Labour manifesto in which many of these policies – in a softer, cuddlier form – were advocated;  New Labour luminaries like Liam Byrne continue to trash the legacy of Beveridge and the welfare state.  No wonder Labour has been so utterly useless in opposition.  The Liberal Democrats, allegedly a moderating influence on the Tories (which they were never going to be – read the Orange Book), are in disarray.  The best they have to offer in response to the abolition 50p tax rate is Clegg arguing for raising tax thresholds at the bottom – which of course will ensure that the rich benefit twice – or a possible commitment to a Mansion Tax. In principle.  In the long term.  If it’s workable.  “All in this together” is a slogan that accurately describes the position of the British political class.

It’s been sad to read some of the comments on Twitter to the effect that the Tories really have blown it this time.  They are not stupid – they are resurgent.  All they have learned from the events of the last two years in Government – helped along of course by their yellow-tied useful idiots, and assisted by Labour’s refusal to argue for a real alternative  – is how easily they can get away with it.

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