From: [email protected]
To: [email protected]
Date: 30 March, 2010
Subject: ‘Honest Vince’ yes; fast and loose noDear Philip,
Thank you for your article in today’s FT, Now ‘Honest Vince’ plays fast and loose. It was very much a column of two halves, the first praising Lib Dem shadow chancellor Vince Cable, the second seeking to bury him.
I’m guessing the source for most of your attacks on the Lib Dems’ pledge to cut taxes by lifting the personal allowance to £10,000 was the Fabian Society’s recent hatchet-job, published via Left Foot Forward. A number of Lib Dem bloggers took its tendentious claims to task at the time.
Even more significantly, so did the Lib Dems’ manifesto author, Danny Alexander, in a reply on Left Foot Forward published yesterday. You won’t have had chance to read it before penning your article, so let me highlight a few key points that Danny emphasises:
- Under Labour, the poorest 10% pay 48% of their income in tax while the richest pay just 34%.
- The tax bill for the poorest 10% of families includes £270 in income tax. Under the Lib Dems that bill would be £0. The next decile pay £599 in income tax; again under the Lib Dems that would become £0.
- Tax credits do not benefit the poorest decile of people the most – the second, third and fourth decile all get more than the bottom one.
- Tax credits increase the poverty trap. When you add up income tax, national insurance and tax credit withdrawal the poorest face a marginal tax rate of 70%.
- And when you add in lost council tax benefit and housing benefit, marginal tax rates can easily reach 92%. For someone earning the minimum wage that would mean an extra hour’s work earns you about 50p
As Danny concludes:
I am not going to apologise for being the only party proposing to provide an extra £1bn for those at the very bottom. I am not going to apologise for thinking it’s important for families on low and middle incomes, as well as the most deprived, to be able to make ends meet and put a little aside for the future. Our tax plans would be the most radical tax reform in a generation, and it is only cowardice from Labour that prevents them following us down this progressive and radical road to a fairer tax system.
Your article focuses on the Lib Dems’ tax cuts, but fails to look at the package of measures the party is putting forward, such as scrapping council tax or the pupil premium, both of which will be of especial help to the poorest in society.
Perhaps oddest of all, though, is the inconsistency in your attack on Vince Cable.
In one paragraph you suggest he lacks political savvy: you talk of “swingeing tax increases” which “might politely be called heroic”. But then you conclude that Vince “is not quite as sainted as some suggest. In truth, he is a politician like the rest.”
Either he’s an impractical idealist, or a cynical politician: you can’t have it both ways. Not unless you are, in truth, a journalist like the rest.
Looking forward to a return to your usual tip-top form soonest.
Stephen
PS: Lib Dem blogger Nick Thornsby highlights how Philip Stephens attacks on Vince differ from his newspapers editorial line here.
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3 Comments
Hi Stephen,
I’m really glad this debate – sparked by Left Foot Forward – keeps on going. I don’t think it’s fair to call the analysis “tendentious”. It was done in the spirit of a critical friend assessing the policy of a party which may hold the balance of power in a few weeks time. Lib Dems should get used to this kind of fair scrutiny if they are serious about power. You have the courage of your convictions and the debate has been passionately fought but please don’t question our motives.
A few points in response (which I have also made in reply to Danny Alexander’s piece):
1. The stat about the bottom 10% paying 48% of gross income in tax is spot on (and covered in Graph 5 in the Horton/Reed paper). But three-quarters of this is from indirect taxes so highlighting it is a good argument for cutting VAT, not for the Lib Dem policy.
2. The saving from the Lib Dem policy for the bottom 10% may include an average of £270 but this hides a range which starts at zero. You cannot escape the fact that many people in the bottom decile will get nothing at all from this policy.
3. Targetting £1bn at the poorest in society is a noble policy but doing it through an overall policy that costs £17bn in tough times is expensive and untargeted.
4. It is completely reasonable to assess policies in isolation. If Labour said it would copy all the Lib Dems tax raising policies (mansion tax, CGT rise, etc) and spend it on a £700 computer for everyone earning over £10,000, some fraction of a computer for people earning £7k to £10k, and nothing for people earning under £7k, there would be an outcry. This policy works in exactly the same way and can be challenged on its merits.
All the best,
Will
[rant]
Will Straw: No, no, no, no.
1) Even if 75% marginal taxes for the bottom decile is indirect taxation, why on Earth should we not work to cut the other 25%? That’s an odd statement to say the least, ans one I’ll come back to.
2) It is simply impossible to construct a tax policy that would benefit absolutely everybody all the time – do you or any of your LFF/Fabian friends have a policy to which this argument could not be applied?
3) It is (either dishonest or) incorrect to characterise the Lib Dem threshold-raising policy as costing £17bn. As you well know the net cost to the Exchequer would be nill, as there would be a large increase in taxes falling upon the wealthiest (mansion tax and CGT are amongst them, as is a tapering of pension relief I believe, oh and ending the unfair system of council tax and replacing it with a local income tax).
4) Laughable. It is absolutely not reasonable to assess policies in isolation – as they would never be implemented in isolation. Believe it or not Danny Alexander and the rest of the manifesto team draw up policies that stand together and complement each other, not quantum packets of wonk-derived headline-grabbers designed that contradict overall policy goal (let’s agree to leave that to George ‘slash-hard-now-oh-wait-cut-NI-instead’ Osborne shall we :-)). As for your analogy of spending tax rises to but computers for everyone – can I just put on record that this demonstrates all that is wrong in Labour’s mindset? Who are you to decide that the £700 (or fraction thereof) would be best spent on a computer?! In acting like a benevolent master, giving handouts to those in the bottom few deciles in the form of computers, (tax credits can be viewed as much the same by the way), you’re violating a fundamental principle – that people are better off being the masters of their own destiny, or being free as we like to call it.
Putting cash back in the hands of those most likely to spend it productively (and freely, not at the behest of Whitehall) is a radical, progressive, economically stimulatory policy – and above all it’s a liberal policy, one that sends the message to the electorate that we trust them to live their lives well.
And lastly, will you please for the love of all that is sane in this world stop making the best the enemy of the good…?! As I mentioned in response to point 1), pointing out that there’s still work to do in reducing inequality is a piss-poor argument against taking some action in the right direction today. Clegg’s a fan of using this phrase, and so am I so I’ll repeat it – stop making the best the enemy of the good. The Lib Dem tax policy is Good, perhaps could be improved upon and added to yes, but good nonetheless – it’s time you recognised that.
[/rant]
Stephen – can you do a separate post if/when Philip replies to you? -Tim