The 50p tax rate is not for dropping – the leadership’s line

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Given some of the recent speculation over the 50p tax rate, the speech from Stephen Williams (Co-Chair of the Parliamentary Party Committee on the Treasury) opening the debate on tax policy was significant:

Now is not the right time to drop the 50p tax rate.

The full context left open if there might ever be a right time, but unlike speculation in The Times a few days back, there was no offer of trading off the 50p rate against the introduction of a mansion tax.

His comments also reflected the text of the motion passed, which included:

The wealthy and those with the very highest incomes should make the greatest proportionate contribution to the tax measures necessary for the reduction of the structural budget deficit and that the Additional Income Tax Rate of 50% on the top 1% of earners is needed to achieve this.

Stephen Williams was also very bullish about the party’s progress towards the £10,000 income tax allowance, going on to talk about what should the policy be beyond that – tying the income tax allowance to what someone earning the minimum wage would earn (around £12,000 currently). That has both a strong principle behind it and gets round the problem of having a nice, round number which gets eroded over time by inflation. Speaking later in the debate, Danny Alexander echoed the national minimum wage target.

With the motion and both amendments passed, the debate also means the party is now committed to the motion’s mansion tax proposal.

On that subject, Deborah Orr is well worth reading in The Guardian:

How ghastly to be facing old age with nothing but a £4m house to show for it
Sometimes I wonder if Vince Cable likes occasionally to yell “Mansion tax!” in a similar spirit to that which “inspires” people to settle down to an evening of committed internet trolling – just to enjoy the annoyance that it causes, and see if anyone can be prodded into saying something outrageous in return. Certainly, the cry of “Mansion tax!” does seem to rouse the most unlikely of people to absolute paroxysms of misguided self-pity…

The general argument [against] seems to be that since homes in London, and in some other parts of the country, became so valuable without much in the way of intentional speculation, then a mansion tax would be punishing people for mere good fortune. It’s rather odd, the idea that wealth accidentally acquired should be sacrosanct, while it’s fine to tax worked-for income at least a quarter, and up to 50%. In fact, it’s rather counterintuitive. John Stuart Mill believed that unearned income should be taxed more highly than earned income, not less, and I do, too…

I can’t help feeling it’s a funny old society that breeds Labour peers who cannot see that the property boom was incredibly socially divisive, and declare that while other sorts of wealth should be taxed, their sort of wealth deserves to be looked on as idiosyncratic, almost a cruel twist of fate, to be gazed on kindly, and with affectionate sentimentality.

* Mark Pack has written 101 Ways To Win An Election and produces a monthly newsletter about the Liberal Democrats.

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  • coldcomfort 10th Mar '12 - 2:35pm

    The principle that unearned income should be more heavily taxed than earned income should be at the core of policy. It becomes more complex when you try to establish what is truly earned – like basic salary perhaps – & what is fortuitous – like a big fat bonus for sacking hoards of lesser mortals and presiding over a sinking share price but nevertheless meeting a soft target. If you want to see what a Tory Government (unfettered by the Lib Dems) would do cough up £3 for today’s Weekend FT or visit & read right winger David Davis piece. In essence he advocates supporting the rich & screwing the rest of us -all dressed up in fine words to look exactly the opposite. In an editorial on 3rd March the FT itself says ” — number of business people have demanded that the UK government abolish the 50p tax rate on high earners such as themselves” [I would dispute the term ‘earned’ for some]. It goes onto to say that Osborne should not cut this [Labour inspired] rate on political rather than on economic grounds and goes on ” — it is self serving of business to blame stagnation on the 50p rate”. The same editorial goes on to make some eminently sensible suggestions about overhauling our tax system which should given attention. For a start it is ludicrous for a property worth millions at One Hyde Park to only incur some £1700 p.a. in Council Tax & even then the owners strive to avoid paying it.

  • Foregone Conclusion 11th Mar '12 - 11:04pm

    Danny, however, didn’t quite say that; his language allowed room for a capital/mansion tax swap for reduction of the 50p rate. In an ideal world I might want both, but if a mansion tax raised more I’d be more than happy to swap it for the 50p rate (although Labour will make hay over it saying we should have done both, the rotten old hypocrites).

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