Labour’s latest Tory trap

In between their bouts of overspending and money printing, the PM and Chancellor have set out their latest political wheeze to upset the Tories.

They propose a 45p tax on earnings over £150,000 a year. Their left wing is delighted. If the Tories oppose it they can say the Tories are the party of the rich, tone deaf to the mood music of a recession hit nation. If the Tories accept it they can claim the Tories too are tax raisers. They imply the tax can fill the massive hole in the nation’s finances, with no pain for everyone else. If only.

I thought George Osborne was wise to duck this simple bouncer today. He should settle his income and other tax levels once he has taken office and has worked out the full mess he has inherited. The Conservatives have no need to make this silly stunt a big issue. They should make the stunts the issue instead.

Let’s point out that it is Labour incompetence with the public finances that has left them needing higher taxes. Let’s point out that if you confiscated all income above £150,000 you would hardly notice the dent in their whopping deficit in the first year , but you would notice the further erosion of the wider tax base as successful companies and entrepreneurs fled the country in subsequent years.

All the Tories need say is they are the party of lower taxes on effort and savings, as we will need more of both to turn this economy round. There is no need to walk right into Brown’s silly trap. We should carry on pointing out the magnitude of the debts and deficits, and the need to control public spending to start to turn it round.

I should point out that Labour’s tax trap soon brought me a phone call from the BBC. Would I like to go on to condemn the 45p? If I said yes, that would make the story “Tory tax wars”, which they would love. Meanwhile yesterday an offer to appear on Newsnight to discuss the debt petered out without any explanation before I had the details of time and place, and an accepted offer to do the Today programme this morning on the same subject was cancelled. Was it something I said, or something I would not say?

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36 Comments

  1. Posted March 21, 2009 at 1:21 pm | Permalink

    If you have The BBC running scared, John, there’s hope for all of us.
    May I plug my “Snotty’s Diary” post of today. I hope people enjoy it. I do find it hard to smile these days!

  2. Brigham
    Posted March 21, 2009 at 2:40 pm | Permalink

    If I was a younger man (not a pensioner) I would be out of this country like a shot. It doesn’t matter who gets in next time, we will be taxed almost out of existence to pay for Brown’s incompetence. Regarding BBC, it could mean Brown’s Bolstering Chaps. I had another word in my mind instead of chaps.

  3. Posted March 21, 2009 at 2:53 pm | Permalink

    I’d guess it was something you would not say and the Beeb would then think what’s the point having him on if he’s not going to give us an argument on air which we can then use to batter the next Tory with. Al la George Osborne or David Cameron. – The BBC must be ran by Jackanory scriptwriters same as Labour.

    Which incidentally MUST have made that tax hike for a number of reasons, mostly political point scoring of course, but the downside is as you say. In so many months when contracts come to an end and people can move about more freely plying their wares in less taxing economies then the brain drain will be happening on Tory watch and not on Labour’s. Secondly, IF the Tories reduce the tax again then they’ll look like fat cats looking after their own. It’s a lose lose situation. Unfortunately, for one obvious reason, I doubt any Labour people will be amongst the brain drain and that’s rather unfortunate too.

  4. Posted March 21, 2009 at 2:54 pm | Permalink

    It’s all just so much ‘Indian bicycle marketing’, to be honest.

  5. chris southern
    Posted March 21, 2009 at 4:25 pm | Permalink

    Your experience in politics shows John, and interviewers (especialy ones who are “friendly” towards the goverment won’t realy want someone who can avoid the political mines whilst being very informative.

    The 45% tax trap is an extremely tricky one, as the lower categories have already been squeezed (how labour got away with taking an extra 10% of one group and granting others a 2% decrease whilst banding the two lots together is beyond me.
    It does give the appearance that an increase at the top looks fair, but at the end of the day, those in the top category are the capitol creators, and are a lot more mobile in the fact that they can, and will, take their wealth and the busines to none EU countries such as India. Now that messes up any goverments arguments over getting rid of tax havens in an instant.

    Looks like the majority of people (the 94% who own 6% of the wealth) in the private sector are going to be hit extremely hard by any goverment due to the reckless spending of the current goverment.

    Wouldn’t it be easier for all to cut out on waste, non essential goverment funded schemes such as lobby groups in an attempt to cut out the defecit, whilst encouraging needed work such as agriculture?
    that way essential jobs (nurses, doctors, police, firemen etc) within the public sector would be saved and the increase in the top tax band would hopefully be avoided.

  6. Susan
    Posted March 21, 2009 at 4:34 pm | Permalink

    We know what you are, even if the BBC do not: a man true to his principles.

  7. John Coles
    Posted March 21, 2009 at 4:48 pm | Permalink

    You evidently see the BBC for the New Labour-supporting organisation that it is. But why, oh why are your party colleagues so indulgent towards the BBC? Reducing the Licence Fee would not only make sense and restore some political balance but in this day and age of SKY subscriptions, it would be a vote winner.

  8. Brian Tomkinson
    Posted March 21, 2009 at 6:23 pm | Permalink

    You did however have a few minutes on the Radio 4’s “Week in Westminster” this morning but much too little time to really get your message across. Without being sycophantic I do think you are the only politician with clear views on this crisis and prepared to put them and answer questions or other points from anyone via this blog. However, this is not enough. Why don’t you make a video and show it on YouTube explaining in simple language what has gone wrong and what you think must be done forthwith to get us out of this mess. That way you would reach a wider audience and even the BBC might take more notice.

    • Lola
      Posted March 22, 2009 at 2:11 pm | Permalink

      That is a bloody good idea!

      • Michael Taylor
        Posted March 22, 2009 at 7:04 pm | Permalink

        Seconded

  9. Posted March 21, 2009 at 6:51 pm | Permalink

    I heard about this on the BBC today. Like many other people, I wasn’t really listening. The impression I got was, therefore:
    1. The shadow Chancellor is rather silly because he cannot make his mind up.
    2. Being a toff, he doesn’t want to tax his mates.
    3. But, being a Tory, he is very keen to wring as much out of the country as possible through taxation, whatever he happens to say.
    Now you have explained it so clearly, I can see that I ought to have been paying more attention!

  10. bill
    Posted March 21, 2009 at 7:11 pm | Permalink

    I agree with you – but this tax issue hasn’t all been one way.
    At least McCavity reduced capital gains tax on labour taking power. The last Conservative government left this at 40% (That I had to pay on flotation)

    Labour reduced it to a tapered 10% now 18% and so did a lot more than the Major government to promote enterprise.

  11. Matthew Reynolds
    Posted March 21, 2009 at 8:09 pm | Permalink

    The 45p tax band thing is just another symptom of why out of control borrowing is a bad thing. One minute the government cannot reach a 20p basic rate of tax without harming the lower paid with the end of the 10p band and then they cannot act on a rising budget deficit without playing the class war card by pandering to the hard-left with 45p tax rate.

    Labour did this to bolster the chances of getting their core vote out in elections while trying to make the Tories appear to be the out of touch party of the rich who are defending those earning over £150,000 p/a while ordinary folk suffer. I also think that as many of the Liberals are really socialists at heart Brown thought that a top rate tax hike of the kind that the Lib Dem’s used to propose might be an incentive to get the Third Party to prop up a minority Labour Government after the 2010 general election.

    Gordon Brown knows that Liberal Democrat support (both in Labour marginals where the Tories are second place and/or in Parliament after an election) could keep him in Downing Street after a 2010 general election. My feeling is that this 45p tax band nonsense is just a ploy to maximize Labour support and to keep a deal with the Liberals on the table should a hung parliament be the outcome of the next general election.

    Gordon Brown is an arch opportunist after all and a canny strategist. It was not principle but calculation that produced the 45p tax band policy. The Laffer Curve proves that it will not generate the money needed to balance the budget after all.

  12. James
    Posted March 21, 2009 at 8:09 pm | Permalink

    I have been waiting for the BBC to give you a decent platform to air your common sense opinions and counter the nonsense spouted by Vince Fable.

    I find it despicable that instead they want to paint you as some kind of extremist.

  13. alan jutson
    Posted March 21, 2009 at 9:26 pm | Permalink

    Me thinks perhaps the penny is at last begining to drop with the media.

    The Labour spin is perhaps at last beginning to run out as more and more institutions outline the serious problem we are in, and its cause and effect.

  14. Bazman
    Posted March 21, 2009 at 9:50 pm | Permalink

    Lies like this will always be uncovered by cider.

  15. Bazman
    Posted March 21, 2009 at 10:09 pm | Permalink

    A 50p one would have been better.

    • Lola
      Posted March 22, 2009 at 2:14 pm | Permalink

      Or even more useful 10% one on all earnings over 15000 and nil below that.

  16. Adam
    Posted March 21, 2009 at 11:23 pm | Permalink

    ‘Was it something I said, or something I would not say?’

    Pure gold. I agree entirely with what you say John. I do wish you’d go and tell ConservativeHome and the commentators quoted by Tim Montgomerie in his post of 19:12 today. They seem to be trying their best to jump into a trap.

  17. Ian Jones
    Posted March 22, 2009 at 12:00 am | Permalink

    The BBC is a shambles. Having just been on holiday and watched BBC world I can confirm it contained nothing but a politically correct dream world without actually having any news.

    Its lost the plot like Brown.

  18. Archie
    Posted March 22, 2009 at 8:34 am | Permalink

    Then it’s the BBCs loss Mr. Redwood; and that of the country at large. I suspect that the streets would be filled with cheering crowds if your party abolished the license fee! Also I see merit in Brian. Tomkinson’s suggestion about YouTube.

  19. Jonathan Cook
    Posted March 22, 2009 at 10:58 am | Permalink

    Blogs are a fantastic thing. Shame they aren’t all pervasive like the BBC.

    I do wonder about the seemingly silly things I hear the Conservatives talking about in the media – given the number 1 priority is to save the UK.

    Thank you for painting the picture which explains the background.

  20. Matthew Reynolds
    Posted March 22, 2009 at 11:02 am | Permalink

    George Osborne needs to think that as the Tories are as likely to win the next general election as Spurs are to avoid relegation from the Premiership. Therefore business need to know that nothing will happen to undermine an economic recovery once Cameron is in Ten Downing Street. To help economic confidence the Conservatives ought to be saying that they will dismantle all Labour’s barriers to growth such as runaway public spending , soaring budget deficits , rising taxes and a flawed system of monetary policy & financial regulation while pledging to free small business from suffocating red tape. By pledging to do all that we can help a recovery as the private sector will know that the Conservatives will be in office soon with a plan to sort things out. Even though we are in opposition we could help investor & consumer confidence in this way.

    Mr Osborne must know that with this 45p tax band nonsense could be regarded by the CBI & co as the thin end of the wedge and companies and the rich could just relocate to lower tax places or just fiddle their taxes more. Lower economic growth and higher tax evasion mean less money not more – this is the result of higher taxes rates especially at the higher income scale. Besides thanks to accountants the wealthy can just maximize what they declare as capital gains and thus pay 18p tax rather than the 45p that was intended ( that is 60% less than Brown & Darling would like and 2p in the £ less than most basic rate taxpayers). So this plan is not fairer and makes no economic sense. At best it will raise £2 billion p/a more and as such will make no real inroad into the budget deficit.

    Why not just ax RDA’s and use the £2 billion saved to offset the revenue lost from not hoisting top rate tax ? The Tories should be the Party of smaller government and be anti- tax – if we copy Brown’s policies then we lose the election as voters will hardly eject the government unless the opposition offer something better. In a crisis the electorate might go for experience over newness. We cannot attack the failings of socialism if we then go and do the same as Brown & Darling – voters are too smart to fall for that.

    Promising to say force all QUANGO’s to take 16% out of their budgets or face being axed , hived off or merged would save £16 billion in one go meaning that the NI & top rate tax hikes could be avoided ( costing £6 billion in lost revenue) and the budget deficit be reduced by £10 billion. Job Seekers Allowance and Incapacity Benefit could be changed into one payment to crack down on economic inactivity so as to offset any extra unemployment caused by cuts in QUANGO’s. We can protect taxpayers at all income levels and reduce government borrowing from day one of a Cameron Premiership.

    The UK cannot take anymore tax hikes and borrowing must come down to give us the kind of enduring economic recovery that Britain had in the early 1980’s and 1990’s. QUANGO’s just provide jobs to Labour supporters and waste public money and Big Government & rising budget deficits are a drag on economic growth while the threat of higher taxes deter investment & consumer spending.

    As anyone pointed this out to the Shadow Chancellor and the Opposition Leader ?

  21. Marin
    Posted March 22, 2009 at 11:02 am | Permalink

    Mr Redwood.

    The real trap is only bothering about income tax rates.

    If the Conservatives (or anybody else for that matter) want to win the general election they must secure the people who always were considered to be Mrs Thatchers bedrock – the home owners. Where the Conservatives went wrong in the 1990s is that they started to ignore or take for granted home owners.

    What tax does the property owning democracy hate most ? The council tax!
    A few pounds on the TV licence – big deal. Most of us pay more in Council Tax in a month than we do for TV licence in a year.

    First year tax cut – ten percent off council tax – repeat every year for 5 years.
    Rejoice rejoice rejoice!
    Focus on cutting council tax.

    Some might argue that some councils won’t comply. Easy – cut the councillors allowances and then council bosses pensions.

    Income tax may not be popular but it has survived 200 years because it has a fairness element. Council Tax is really hated in a property owning democracy. Make a council tax payer happy – cut the council tax in half!

  22. David Inglis
    Posted March 22, 2009 at 2:26 pm | Permalink

    I think that John is quite right not to respond to the BBC about an increase in the tax rate to 45p for incomes over £150,000. It is such a trivial amount it isn’t worth debating. Now 50p for incomes over £100,000….

    • David morris
      Posted March 22, 2009 at 8:41 pm | Permalink

      You clearly don’t get taxation do you?

      Anyone on that level of income will have a half decent accountant and whatever the headline rates will only pay what they want to. So make it 50p over £100K, smirk at your class warrior envy, and then watch the tax take go South. brilliant.

  23. A. Sedgwick
    Posted March 22, 2009 at 3:34 pm | Permalink

    You are right to be wary of New Labour’s tactics because they are well ahead of Cameron and Co. For what it is worth and as an example DC is becoming increasingly ineffective at PMQs. Almost every day specific damming issues come to light concerning Brown and others. His ignoring of warnings from 2004 about financial risks are widespread. Each question should be cold and succinct, leave the viewers to assess the ranting, raving and non answers of the First Lord and cut out the rhetoric. Two questions from today I would ask are: increasing homelessness(Tracy McVeigh in the Observer) and is the Chancellor trying to kill off Premium Bonds with the reduction to 1% interest – more economics of the madhouse.

  24. Posted March 22, 2009 at 6:29 pm | Permalink

    I watched Newswatch this weekend, having been intrigued by an advertisement earlier that referred to it ‘challenging the news makers.’

    An interesting statement reflecting, I suspect, the corporate mindset. I had thought the point of any news entity, especially the BBC, was just to report it.

    I guess this goes to the new agenda where events get interpreted, truth is assisted to emerge and narratives get enhanced. A pity that all this seems to be carried out with a thick coating of institutional group think to ensure that all these ‘enhancements’ happen in a manner that ensures the public get the messages, and are told how to think, in the ‘right’ way.

    Going from 4M to 11m viewers may be good for target-based executive bonuses, but not really as effective in meeting the supposedly ‘objective’ BBC’s remit, surely?

  25. David b
    Posted March 22, 2009 at 6:39 pm | Permalink

    Reading about the hoops our banks have gone through to avoid taxes, and their former bosses have gone through to get their lump sums free of tax, I don’t suspect too many higher earning people will actually be paying much higher band tax. It is an accountant’s purpose in life surely to keep our tax bills down. ( Jaquis £116K wouldn’t have been taxed I expect).

    I have an idea. Why not set the personal allowance level for everyone at the same rate as the minimum wage. This would make votebuying governments face a fall in tax revenue when they pushed the rate up, and tax cutting governments consider the poor when they raised the tax threshold. It could usefully be combined with another policy. A flat tax on all earned income, be it dividends, rents, capital gains, income from employment whatever.

    This way we would have no incentive for creative accountancy. No disinsentive to work because higher rate bands ate into your extra earings, and – heres the killer – it would all be so simple to work out we could fire the majority of the inland revenue staff in one go. Fairness and efficiency.

    • alan jutson
      Posted March 22, 2009 at 11:43 pm | Permalink

      Agree we need to simplify the Tax system but not a blanket Tax from the Minimum wage, we need the start point to be higher say £15,000 this may then encourage those who have no work to look for it, and take many out of the TAX/Benefits trap.

      We also need to combine National Insurance Tax with Income Tax so we again have a simple One rate of Tax, we can then discuss what should be that rate, and if and when a higher rate should be applied to earnings.

      Simplicity and transparency should be applied to all other Taxes. At the moment our system is far far too complicated

      You mention expenses:
      In business, expenses are paid to cover your out of pocket costs, no more no less, with reciepts as proof of expenditure.
      They are certainly not an additional income which is Tax free.

      If Mr McNulty, Jackie Smith or any other MPs have not paid out any money, then they should not be allowed to Claim money from the Taxpayer.
      If they have paid out money, then the people to whom they have paid money should be taxed on it, as it is income.

      Guarantee nothing will happen, it seems its one rule for them, and another for the rest of us.

  26. Lola
    Posted March 22, 2009 at 8:51 pm | Permalink

    Did you hear the BBC reporting of Ken Clarkes responses regarding the IHT reform proposed by yourselves? Talk about biased. What I heard was KC saying that because of the financial mess made by New Labour it was irresponsible of the Tories to promise any tax reductions. It was reported by the BBC as the Tories Tax plans unravelling. Really, what can one do with the BBC? You have GOT to ‘reform’ it when you get into power.

  27. Bazman
    Posted March 22, 2009 at 9:36 pm | Permalink

    It’s very easy to link bankers to tax (avoiders-ed). Has any other readers of this site not seen this?

    • Lola
      Posted March 23, 2009 at 12:03 pm | Permalink

      Avoidance is legal. Evasion isn’t. It is an absolute responsibility for every taxpayer to make sure that he organises his affairs in the way that best minimises tax. Banks are owned by shareholders, or now the Government. Paying less tax increases the returns for those owners, who then pay tax anyway. If the State owns banks the tax the bank pays is just a money merry go round.

  28. Bazman
    Posted March 22, 2009 at 9:41 pm | Permalink

    I suspect Tories in time, are forever stalled?

    • Lola
      Posted March 23, 2009 at 12:05 pm | Permalink

      Bazman old son, you really do have a problem. It is the lefties that are stalled in time. Pursuing a failed philosophy which time after time collapses as the wealth destruction system that is socialsim catches up with them and reality breaks into the bunker. Be very clear that what we are now seeing is the ‘markets’ – that is people like me and you – passing judgement on failed lefty policies.

  29. Robin
    Posted March 23, 2009 at 7:13 pm | Permalink

    The best response to any question about tax is ….

    “If the Labour Party carry on spending at this rate we will be forced to have a 45% basic rate of tax.”

    …. and that is sadly true.

2 Trackbacks

  1. By On the subject of Conservatives and Tax on March 21, 2009 at 10:29 pm

    […] Redwood in his blog mentions that the BBC called him to ask for a negative comment on the proposed 45p tax rate and […]

  2. […] by davidburbage on March 21, 2009 John Redwood on the money again. What a curious collection of interviews […]

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    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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