Explaining the 50p top tax rate
Posted on 28 April 2009 | 9:04am
I’m out at an event with Eddie Izzard later, one of a series the Labour-supporting entertainer is doing to help the Party.
And I’ve been thinking – how best to deal with questions about the 50p tax rate.
The first thing to say is that we, even more than the Tories, are the ones who should be pointing out that it is a breach of a manifesto commitment, making clear we did not want to go against the manifesto, and that we understand how serious that is.
Politicians, contrary to what some may think of them, do not like to break promises. Also, the maintenance of Labour’s promises on income tax has been a very important part of our success, politically and economically.
The fact of the new top tax rate is therefore evidence of how serious the economic situation is. That too is best openly stated rather than understood. Governments have to make choices about where and how to raise money and, at times, where and how to cut. And to be fair to the public, they get that.
Rightly ministers want to highlight the help for the unemployed, the support for training, the continued commitment to invest through the recession, all the measures aimed at enabling Britain to emerge stronger when recovery comes. But all of the difficult decisions have to be constantly explained alongside.
The new top rate was bound to get disproportionate coverage in the national media, as all editors and most commentators will be on the new top rate, which means it requires more not less explanation, on economic grounds. Otherwise, as seems to have happened, people who threaten to leave the country because of having to pay higher tax are presented as patriotic heroes, driven away by a red in tooth and claw Labour government.
So part of the argument has to be that this is a long long way from Denis Healey’s threatened squeeze till the pips squeak. This is a global financial crisis, in which all countries, all businesses, all families are having to deal with some of the fall out in different ways. As part of the national response, everyone helping out must be part of a call to arms to help Britain through the crisis.
What we should not be doing is giving any sign whatever that somehow this is what Labour politics is all about. We regained electoral success by understanding that to meet our social justice objectives, we had to understand and appreciate enterprise too. Neither the banking crisis, nor the new top rate, changes that. The worst of business may have helped get the world into the crisis. But the best of business is going to have to help the world out of it.
So our reaction to those threatening to leave Britain should not be ‘piss off to Switzerland then’, but that we understand there may be a link between tax rates and the desire to invest in the UK economy, which is why this should be seen not as an ideological shift but as a neccessary and difficult measure in extraordinary times, at the end of which we are determined to ensure Britain will emerge strong.
Finally, how to deal with questions about the future. The honest answer, when asked if we can be 100 per cent sure about growth forecasts and debt predictions, is No. Again, the public get that. They want a mix of confidence – signs that the government has done the best possible analysis based on all the information available – and candour.
So in a nutshell ‘the new top rate is a manifesto breach, and nobody likes to break manifesto promises. That we have done so is a sign of how extraordinary are these economic times. This is a measure to raise money, not a shift in our stance on enterprise, because business and enterprise are central to national recovery. It has to be seen in the round, with all the other measures we are taking to try to lead Britain through the recession. These are uncertain times and we cannot guarantee success, but we believe this is the best response at this time to deal with the worst effects of a global crisis and its impact on Britain.’
I’ll let you know if Eddie nods or shakes his head; and address another day the issue of how I think we should deal with the Tory response.