The 50p boomerang

The decision to raise the higher rate of tax from 40p in the £1 to 50p is a spectacular boomerang.

Those intellectual giants, Brown and Balls, plotting in the bunker at Number 10 thought a 50p tax rate would split the Tories and with luck unite all but the very rich against the Conservatives. If David Cameron backed it, surely Tories would queue up to condemn him. If he opposed it, surely the country would flock to Brown’s side. They never thought that David Cameron would reveal it for what it is – a tawdry piece of juvenile and foolish politics at a time when we needed a budget for national recovery and solvency.

Instead of it being a major new weapon to define politics in a way favourable to Labour, it has become a huge and looming Labour bomerang. Blairites are queueing up to condemn it. Moderate Labour MPs wanting to keep their seats are amazed at the vitriol being poured against them for the budget. Many Labour MPs who individually might like a soak the rich approach know that the veneer of New Labour and the Blair magic was important to their past victories, and new feel very naked with the New decisively and finally stripped from the brand. Economists and forecasters are pointing out that higher rates may result in less revenue. Wait for the news of businesses and entrepreneurs moving abroad. Read the figures the government has produced to show the collapse of revenue we face anyway.

It all underlines Labour politics in the age of McBride. It is cynical, nasty, and all for effect and spin. Many decent Labour MPs need to send signals to their electors that they do not go along with all of this. 50p tax turned out to be as divisive and effective as Mr Brown hoped, but not at splitting the Tories but at splitting Labnour.

For his sake,the sooner he U turns the better. I suspect he will not, so his civil war will intensify.

To change the metaphor, his big gun against the Tories has recoiled and done great collateral damage. Where will he try next? His list of broken election pledges is now long. The public will remember for a long time the cynical destruction of the offer of a referendum on Lisbon, and the way he set aside the pledge not to raise income tax rates.

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17 Comments

  1. Amanda
    Posted April 25, 2009 at 9:14 am | Permalink

    So, there is still some justice in the world !! Will good win after all?

    Right, signed the ‘resign Mr Brown’ petition on the Number 10 website (will they actually let this build up?). Now off to write my Labour MP a letter – to vitriol or not to vitriol that is the question? It might be a change if I wrote a nice letter to him asking him his views on the budget.

  2. oldrightie
    Posted April 25, 2009 at 9:24 am | Permalink

    Where will he try next? With some aged hooker’s memoirs of ceiling studies, ghosted by McBride, I suspect.

  3. Lola
    Posted April 25, 2009 at 9:53 am | Permalink

    O/T but what are you going to do about the out of control banking sector? I only ask today one of my children was charged £60 by Lloyds HBOS for going about £5.00 overdrawn accidentally for the first time ever? This is criminal behaviour. It is banks exploiting their catelised monopoly position to steal from their customers. Prior to the application of the stay imposed by this stupid government and its apparatchiks freedom and the law was succeeding in reversing these charges and revealing the practice as illegal.

    In other part of your job in sorting out the banks is to get them to act lawfully. Opening them up to competition and exposing them to the rule of law would be a good start.

    They are out of control.

    • Adrian Peirson
      Posted April 25, 2009 at 1:52 pm | Permalink

      Take them to court over your Mortgage, car loan and credit card debt, argue the case that since banks operate on the Principle of fractional reserve banking, they never lent you 100% of what they say they did but a fraction of it ( usually 10% ) so in all probability, they owe you money because you will have undoubtably paid off more than you ever owed them.

      • Lola
        Posted April 26, 2009 at 9:25 am | Permalink

        Hmm. Not sure about that argument. Oh, I would love it to be so, but I am not sure about it. Consider, they borrowed 90% to lend on to me. In other words they are an intermediary between a set of depositors and a set of borrowers, making a turn or commission off the deal.

        On the other had if you do want to argue on the ‘creation of credit’ view then I am not sure I am clever enough to do that effectively.

        • Adrian Peirson
          Posted April 26, 2009 at 2:42 pm | Permalink

          They didn’t Borrow 90% to lend to you, they Borrowed 10% to lend to you, 90% of what they lent you was thin air.

  4. alan jutson
    Posted April 25, 2009 at 9:55 am | Permalink

    Would be good to see very short clips of all the promises made over the last 12 years.
    Then to outline the facts of all the tax increases, uncontrolled spending and the growth in Public Sector Employment.
    Oh forgot and the new restrictive laws and terror powers.
    They have changed this Country for the worse in almost every respect, what a legacy.
    New Labour, New Disaster.
    Interesting they had a listener comment on radio five live yesterday, what words could you fit to GDP.
    Suggestion.
    Gordons Dire Promises.
    Give Dave Promotion.

    • Julian
      Posted April 26, 2009 at 12:56 am | Permalink

      Alan,
      Spot on. When surveying the wreckage left by New Labour’s policies, it is impossible to find any concomitant improvements to justify the destruction. Everything they have touched has resulted in degradation:

      Education: Primary – out of control 7 year olds
      Secondary – illiterate 16 year olds
      Further – classes of disinterested students wasting their precious time in order to claim the £30 bribe.
      Higher – whole cohorts of youngsters studying pointless degrees carrying mountainous debt burdens. More wasted time.

      Police: Politicised shock troops for Labour’s equality agenda.

      Health: Unreformed sink-hole of tax-payers largesse with collapsing productivity.

      Parliament: Marginalised meeting place where power groupies engorge on more tax-payer largesse for no output. More wasted time.

      Local government: Overmanned, inefficient, incompetent, expensive social engineering projects with an incidental, haphazard interest in garbage collection and wasting road budgets.

      Economy: Private sector serfs working to service the needs of a public sector gutter elite workforce. Debt, debt and more debt. A slave economy based on entire groups of people working so groups of welfare clients don’t have to.

      Defence: Chronically underfunded forces fighting wars so Americans can continue to drive big uneconomical cars and walk about their houses in winter without the hassle of wearing slippers and sweaters. Defeat in Iraq. Probable defeat in Afghanistan.

      Margaret Thatcher broke a lot of eggs but she made a lot of omelettes as well. Can anybody show me one New Labour omelette?

  5. Neil Craig
    Posted April 25, 2009 at 9:56 am | Permalink

    When Cameron made it clear he would support 45% Brown simply upped the ante, however all the economic arguments against 50% apply to 45% as well. Nonetheless by opposing this increase & if they say they will reverse it in government the Conservatives may persuade a few of our most talented to saty for the next year & will thus do the country a significant service.

  6. Acorn
    Posted April 25, 2009 at 10:44 am | Permalink

    I expect that global Bond Traders are in the 150k plus salary band. Not the sort of people you want to p**s off with a tax and NI rise. Particularly as these will be the guys who decide if UK PLC sinks or swims.

    The bond market decides what interest rates will be, not the BoE, the only thing the BoE can really control is the base money supply and the split between that and Guilts in the total UK government’s Treasury debt mountain.

    Alice at UKBuble describes the budget so; “The real story behind its budget is next year’s election and the one after that. This is a “poison the well” budget. Brown, Darling and the rest of the New Labour crew know that the game is up.”

    http://ukhousebubble.blogspot.com/2009/04/poison-well.html

    Should UK IOUs of all kind and there derivatives, start to look like they are “outliers” on the market’s risk / yield charts, then get clewed up on “collateral calls” and then think about why the Banks are stashing away all that crispy new cash and not lending it to you.

    http://marketplace.publicradio.org/videos/whiteboard/collateral_calls.shtml

    • Adrian Peirson
      Posted April 25, 2009 at 2:21 pm | Permalink

      Bond’s, Gilts are Simply Gaurantees, they are Gaurantees of your, or your childrens future Labour, traded and Gambled in Casinos we call the stock exchange.

  7. mikestallard
    Posted April 25, 2009 at 12:02 pm | Permalink

    The Labour Government screwed up really efficiently in the 1940s. Remember the groundnut scheme? Or rationing?
    The Labour Government screwed us even more effectively in the 1970s. Remember thee three day week and sitting in the dark? I was stealing food for my family from the school kitchens, I remember, at the time.
    Now, in the early years of the 21st century, they are doing it to perfection. Just one of the nationalised banks needs to implode and – bingo – down we all go.
    Will we never learn?
    Every 30 years, we do the same silly trick.

  8. APL
    Posted April 25, 2009 at 12:35 pm | Permalink

    JR: “Many decent Labour MPs need to send signals to their electors that they do not go along with all of this.”

    How about this for a signal ‘decent’ Labour MPs? Vote down the finance bill!

  9. Steve Horgan
    Posted April 25, 2009 at 1:37 pm | Permalink

    What amazes me is how juvenile it is. With the country in financial crisis the Labour government is more interested in using the tax system to set political traps for the opposition instead of showing a bit of leadership and actually addressing the real issues. As a trap is also so utterly transparent that it would only do any good if the Conservative leadership were idiots, and they really aren’t. Good to hear that not all Labour MPs are impressed either, some of them are decent people and they must be appalled that Gordon Brown would do something like this.

  10. SJB
    Posted April 25, 2009 at 2:59 pm | Permalink

    JR: “The public will remember for a long time the cynical destruction of the offer of a referendum on Lisbon …”

    Blair offered a referendum on the 2004 EU Constitution, but was a similar offer made in relation to the Treaty of Lisbon?

    Many people claim that there is not much difference between them 🙂 but it seems to me that governments (both Labour & Conservative) tend to favour form over substance. For example, the Maastricht Treaty explictly stated: “This Treaty marks a new stage in the process of creating an ever closer union among the peoples of Europe…” (substance) but the Conservative government did not offer a referendum because an amending treaty was dealt with under the auspices of parliamentary democracy (form).

  11. Jimmy F
    Posted April 25, 2009 at 6:22 pm | Permalink

    I will certainly leave the country if we hold on to a 50p tax. The thing is statistics wouldn’t even pick up people like me as I don’t earn anywhere near this threshold. The fact is that this sends out all the wrong signals to me and I just want to work in a country where hard work and enterprise is rewarded. Hong Kong’s top rate is 16% – that appears pretty appealing to me right now.

  12. Matthew Reynolds
    Posted April 26, 2009 at 11:41 am | Permalink

    My solution would be for a Tory government once in office to wait until it is practicable to sell off shares in the banks & until the PSBR is 80% less as a share of GDP. Then billions could be raised from a privatization program including bank shares , Channel 4 , Royal Mail & the BBC.

    This privatization package could offset the initial revenue lost incurred by:-

    1)Axing claw-back thresholds for basic personal tax allowance & pensioner tax allowances,
    2) Reversing cuts in pension fund tax reliefs for those paying super-tax,
    3)Cutting top rates of income tax from 50p & 40p to one 30p rate with a threshold of £300,000,
    4)Ending CGT and tax gains as income for the first two years -leaving them tax free after that,
    5)On an automatic annual basis top rate tax threshold to rise by prices or earnings whichever is greater.

    If budget deficits were lower then this plan would be affordable and thanks to less avoidance & higher productivity coupled with more rich people moving here for tax reasons revenues would rise. After top rates came down from 98% & 83% to 75% & 60% in 1979 and again to one 40% rate in 1988 revenues went up & the rich paid a bigger share of total taxation and donations to charities went up.

    To get the national debt back under control the Tories ought to talk to CIVITAS, Adam Smith Institute , Center For Policy Studies & Reform about what long-term public sector reforms are needed to save at least say £70 billion within six years to cut the PSBR. Then the IFS could vet the plans to make them watertight. The aim should be to kill off basic rate tax on savings,shares/dividends & pensions , axing the planned NI rise and raising the basic personal allowance to say £10,000 & pensioner tax allowances to one £18,000 level while reducing the PSBR. Work on cutting taxes should only start once the budget deficit has been cut year on year for three years back to back -i.e. no tax cuts for the first full three fiscal years of a Tory government. So the NI hike might have to go ahead & be reversed two or three years later.

    Tax cuts are a superb idea but to start with VAT could rise by 5% to 22.5% to fund a £25 billion cut in the budget deficit. We can probably get away with blaming Labor irresponsibility for the need to hike VAT. The priority should be less public debt , lower taxes for the poor & middle classes and then privatization & greater incentives for wealth creation.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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