Labour and the Conservatives are both wrong about income tax

27 January 2014

Never interrupt your opponent when he is making a mistake. On the other hand, when your opponent has made a mistake try not to match him by making an equal blunder of your own.

That’s not how Westminster politics works, of course. For reasons that presumably make sense to the respective parties, Labour and the Conservatives have each managed to cock-up their tax policies. Specifically, they are both wrong on the politics of the 50% rate of income tax.

That is, the Tories should never have cut the rate of tax paid by those few Britons earning over £150,000 and Labour should not be promising to restore the 50% rate.

This is not an argument about finances but about signalling. The Tories may well be right that raising – or, rather, re-raising – the top rate of tax to 50 pence in the pound will not actually raise very much, if any, additional revenue. They may be right to think a lower rate of tax is both fairer and more efficient.

Claim your gift

Be that as it may, making a tax cut for ‘millionaires’ one of their first items of business was a dreadful blunder. I suppose it is their good fortune that George Osborne’s mistake has been matched by Ed Balls’s commitment to bring back the 50p rate. Happy days! Dumbness everywhere!

Both parties, then, have contrived to adopt policies that confirm some of the most negative stereotypes voters attach to Labour and the Conservatives. Labour will tax and spend; the Tories’ instincts are always to ask what’s best for the wealthiest Britons. Heckuva job.

Nor does it matter very much that very few people will ever be taxed at 50% on any portion of their earnings. It is not so much that this has an impact on your finances but, rather, that it sends an unmistakeable signal about priorities and instincts. We know where Labour and the Tories stand and we don’t much like the look of either of them.

So here we have it. If Labour will raise taxes for them, perhaps they’ll also raise my taxes? As for the Conservatives, well, what else will they do for their rich chums (many of them probably old school chums too)? You should probably want to confound negative stereotypes, not reinforce them.

Perception matters. The Tories and Labour seem to have forgotten that as part of some grand bargain of Mutually Assured Stupidity.

But that doesn’t seem to be the way politics at Westminster works these days. Rum.


Give the perfect gift this Christmas. Buy a subscription for a friend for just £75 and you’ll receive a free gift too. Buy now.

Show comments
  • AndrewMelville

    The UK’s rate of taxation is obscene. Imagine the gall to take a 50% bite of a person’s income and expect them out of the remainder to pay local taxes, excise taxes, fees, licences etc, etc.

    All government’s naturally greedy and inefficient. In the old days we knew that the King was trousering the dosh and so we all rightly despised taxes and avoided them when we could. Now the British people are sold a pack of lies so that some actually believe that taxation is good and that they benefit from it.

    Cut absolute and relative levels of taxation for everyone.

  • Jericho One

    Don’t the lowest earners already pay a 50% tax rate when you consider things like council tax, duties, inflation, TV licencing, fines, green taxes and a myriad of other stealth taxes…?

  • Ken

    it is such a shame that the economics of this country are being driven by good politics rather than good economics. I expect we will have a commensurate outcome.

  • Shinsei1967

    In what way was reducing the 50p tax rate one of Osborne’s “first items of business” ?

    He announced the reduction in the March 2012 Budget to be implemented in the April 2013 tax year.

    • Mynydd

      He gave a years notice so that his pals could delay payment from the 50% to the 45% year. I also note that the wealthy businessmen didn’t leave the country when Mr Cameron/Osborne imposed a 50% tax rate on them for 3 years. So why complain when Labour does the same.

      • Shinsei1967

        Darling also gave prior notice of 50p tax hike so that the better paid could reverse forestall income. Neither however contradicts my point that this wasn’t one of Osborne’s first items of business.

        Do you have any evidence that people didn’t leave ? I could give you names of a couple lawyer/finance chums who now work into HK not London. Tax issue would have been one of issues that motivated them.

        And then you’d need evidence of those who were planning to move to UK but were put off.

        • Mynydd

          I repeat; Mr Cameron/Osborne imposed a 50% tax rate on them for 3 years. So why complain when Labour does the same. I worked in over 20 projects overseas and it wasn’t because of the tax rates in the UK, it was because the wage rate much higher.

        • Ken

          I too have had quite a number of friends leave the UK because of punitive tax rates. They will never return.

  • FF42

    I suspect rather few people struggling on £15 000 a year would see a tax increase on those earning £150 000 as an an attack on them. If you ask those earning north of 150K whether they want to pay more tax, they unsurprisingly say, no. They probably don’t go onto say they prefer those on 15K to make up the difference.

    Whether those on modest incomes buy into Labour’s tax raising argument depends on them making a credible case that the burden will shift somewhat from the relatively poor to the relatively rich. They may not be credible, but it’s low risk, politically.

  • Hugh

    The numbers in favour of the 50p tax are much higher than those against it, and by making it a manifesto commitment Labour can make Osborne’s cut a discussion point in the run up to election, long after voters would otherwise have forgotten it. I can’t see it’s bad politics from Labour’s point of view.

    • wycombewanderer

      The point is that by committing to this and at the same time committing to eliminating the deficit as well then people can see quite clearly that a device that will not raise anywhere near the sums required will need many other tax rises as well.

      The tories need to keep hammering this home.

      • Hugh

        Well, first, that’s not the point Massie made, which I was responding to. Second, it’s not really a weakness with pledging to reintroduce the 50p tax; it’s a weakness in their commitment to eliminating the deficit, and the fact that their answers for how they will do so are unconvincing. The Tories would certainly do well to attack that, but it’s not going to detract from the fact that committing to reintroduce the 50p tax will apppeal to some, remind many others the Tories decided to scrap it, and alienate very few.

  • saffrin

    About as pointless a report as my post.

Can't find your Web ID? Click here