Labour put down tax amendment that would have given Tories tax cut they want – which Lib Dems stopped

I realise that Parliamentary shenanigans and point scoring isn’t everybody’s cup of tea, but it’s worth pointing out that Labour today squandered a relatively good position going into the first PMQs of the new Parliamentary term. Ed Miliband had an open goal ahead of him given controversy over the pensioners’ tax allowance,  “pasty tax” and charity tax relief yet he and his strategists still managed to misunderstand parliamentary procedure to a ludicrous extent. He’s just lucky that more excitable members of the Tory benches didn’t take their chance to have some fun.

Miliband looked not to Labour big hitters of the past for inspiration, but to a tv political satire. He could have pulled words from Barbara Castle or Michael Foot or Tony Blair. Instead, he pulled them from foul mouthed spin doctor Malcolm Tucker from The Thick of It, describing the Government’s recent performance as an omnishambles. It’s not been the best, for sure, but Labour have singularly failed to capitalise on the Coalition’s woes.

Since the Budget, Labour have squealed long and loud about how wicked the Coalition is, particularly on cutting the 50p tax rate to 45p. They had the chance to vote against it in March, indeed Ed Balls promised they would, but, as Mark Pack’s handy infographic shows, not one of them did.

They had another go today, but they put in an amendment which, if it had passed, would have set the top rate of tax at 40p. This, bizarrely, would have been exactly what the Tories wanted all along, and which Liberal Democrat ministers stopped. In fact, Osborne only got to cut the rate to 45p because Liberal Democrats insisted  taxes were raised on the wealthy which would bring in 5 times the saving.

Let me explain. The Finance Bill clauses put forward by the Government were as follows:

Clause 1 – Income tax

Charge for 2012-13 and rates for 2012-13 and subsequent tax years

(1) Income tax is charged for the tax year 2012-13, and for that tax year.

(a) the basic rate is 20%,

(b) the higher rate is 40%, and

(c) the additional rate is 50%.

 (2) For the tax year 2013-14.

(a) the basic rate is 20%,

(b) the higher rate is 40%, and

(c) the additional rate is 45%.

The Labour amendment was to delete 2(c) which, if passed, would have left us with no additional rate. What they should have done was to put in an amendment deleting Paragraph 2 in its entirely meaning the tax rates for 2013-14 would have had to be discussed at a later date.

The Government won the vote comfortably, by 67 votes, but what would have happened if a few of our more mercurial right wing Tory friends had decided to vote with Labour to abolish the 45p rate?  The Labour front bench would have been drowning in egg yolk.

That wasn’t Labour’s only mistake of the day. Their promised amendment on tax reliefs didn’t even make it into the debate.

If they can’t get the basic parliamentary procedure right in opposition, what chance have they in Government? They’ve been calling the Government incompetent, but this display hardly inspires confidence.

The Co-Chair of the Liberal Democrat Parliamentary Treasury Committee, Stephen Williams, had this to say about the day’s events:

“It is worrying that the two Eds don’t understand the fundamental principles of our tax system, despite having worked in the Treasury for many years as Gordon Brown’s backroom boys. 

“It took them 13 years to introduce a 50p rate and then they only did so shortly before a general election. Now that the local elections are coming up, suddenly they care about it again and put down ill-thought through amendments that remove the top rate altogether.

 “Labour’s biggest tax change was to remove the 10p tax rate hitting people on low and middle incomes while Liberal Democrats are giving nearly 25m basic-rate tax payers an Income Tax cut and have lifted more than a million people out of paying Income Tax altogether. At the same time, we’re making the rich pay their fair share by cracking down on loopholes and excessive tax relief.

* Caron Lindsay is Co-Editor of Liberal Democrat Voice and blogs at Caron's Musings

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8 Comments

  • Ye Gods. They are a shambles aren’t they!

  • the trouble is that we get the facts here, but will the press tell the public.? Will they hell.

  • Thanks for informing us of the true facts on the two Eds. Going to Harvard no help to EB’s. A pity your article will not be mentioned in the Press especially the BBC

  • Jonathan Featonby 18th Apr '12 - 10:03pm

    It’s maybe worth noting that due to the strange way in which parliamentary language works, it seems that the Labour amendment, if successful, would have forced the Government to re think what the higher rate of tax would be, rather than doing away with it altogether. During the debate on the Bill (see http://bit.ly/J5hPn1) Labour argued that if they were told making an amendment to change the upper rate back to 50% would have been out of order. This appears to because as the Budget was voted through by the Commons, the Opposition isn’t allowed to introduce a higher rate of tax.

  • Jonathan – you are right on that. You can’t amend the Finance Bill to introduce a higher rate of tax. I understand the only option is to try to force the Government to re-think their proposed tax cut

    Caron – while this piece is good knockabout for those interested in legislative convention, it skirts around what appears to be the central fact that Labour want to keep the 50p rate of tax whilst the Lib Dems want to cut it to 45p. And the Lib Dems are supporting this tax cut for the rich whilst also supporting some pretty vicious welfare cuts for the poorest

  • Yes I’m afraid Caron needs to go and do some more homework on parliamentary procedure. Meanwhile in the real world Lib Dems are increasingly polling behind UKIP in national polls. Think you should be more worried about that.

  • peterApr 18 – 9:06 pm…..the trouble is that we get the facts here, but will the press tell the public.? Will they hell….PaulineApr 18 – 9:48 pm………..Thanks for informing us of the true facts on the two Eds. Going to Harvard no help to EB’s. A pity your article will not be mentioned in the Press especially the BBC………..

    It’s strange how we have ‘morphed’ into Toryism and now blame the media (especially the BBC). This thread is just another LDV, anti-Labour non-story in which the ‘facts’ are dubious, to say the least.

    In the real world (which many here don’t appear to inhabit) perception is everything. The media are as eager for an anti-Labour story as Anti-Tory or anti-LibDem. However, only the wilfully ignorant would fail to see that the recent coalition fiasco over fuel, the so called ‘Granny, Pastie, Charity, Caravan, Church, etc. Tax’ farrago are Tabloid heaven.

    Our MP’s are often seen to defend whole packages which, when challenged (often by Conservative backbenchers) , ‘Teflon Dave’ distances himself from. Recently, I listened to Danny Alexander wholeheartedly defending the ‘Charity Tax’ and, shortly afterwards, a Tory treasury spokesman strongly hinted that, ‘Changes could be made”.
    Why are we then surprised that the public view us as they do?

  • Rachel Addison 18th Jun '13 - 7:07pm

    Hi Stephen,

    I believe a vote to amend Section 58 of the finance act will occur on June 20th. If the amendment is successful then this will result in over £200,000,000 worth of aggressively avoided tax by wealthy individuals who chose to enter a scheme provided by Montpelier during the years 2001 to 2007.

    The scheme abused the double taxation treaty and resulted in the individuals concerned (Who consisted of IT contractors, Doctors and Property developers) paying around 3.5% tax annually.

    MPs are currently being intensely lobbied by a group called No To Retro Tax which was formed by these high net-worth individuals after losing in the court of appeal (See the judges decision in the link below). Please do not fall for their attempt to garner sympathy, i know some of these people personally and they knew exactly what they were getting into at the time. Their strategy was to join a scheme such as the one provided my Montpelier in the full knowledge it would be shut down down at some point. They would then move onto the next scheme in a perpetual game of cat and mouse. They were warned from day one to keep hold of their money if a situation like this ever arose.

    Apart from the fact i find paying 3.5% total tax on £150,000+ income totally abhorrent (especially in the current climate) i was also personally affected. As an IT contractor i couldn’t compete with my colleagues who were on similar rates but were able to undercut me. As a result I no longer work in that sector.

    As a member of the FBC I am appealling to you to reject the amendment and have the hundreds of millions returned to the majority of those less wealthy tax payers who could not, or chose not to enter into such morally dubious schemes which made a mockery of the law that parliament intended.

    Your’s faithfully

    R

    Court of appeal ruling : http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWCA/Civ/2011/893.html&query=huitson&method=boolean – See more at: http://www.taxresearch.org.uk/Blog/2013/04/19/labour-welcomes-the-gaar-but-says-it-has-to-be-reviewed-in-two-years-because-there-are-so-many-flaws-within-it/#sthash.Bk2NE86o.dpuf

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