What New Labour would have done yesterday
James Forsyth 1:19pm
With The Sun, The Times and The Daily Mail declaring the death of New Labour, it is worth thinking about what a New Labour government PBR would have looked like. For an idea you can look at a PQ that Stephen Byers, someone who has kept and advanced the New Labour faith, asked back in April.
Byers wanted to know how much it would cost to lift half a million people, a million and a million half out of income tax altogether. Interestingly, the cost of lifting a million people out of income tax altogether for one year—by raising the personal allowance by £960—was £11.1 billion. Now, the cost of cutting VAT to 15 percent until January 2010 is £12.4 billion.
So, New Labour might have lifted people out of income tax altogether—helping the poor but also sending out a low-tax message—and not introduced the new top rate of 45p, a measure that will raise less than a billion pounds and is all about politics not raising revenue. I suspect that this would have worked better both economically and politically. Certainly, the Tories would have had a harder time dismissing such a tax cut.
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samson
November 25th, 2008 1:33pm Report this commentI dont see why the tories would have found it harder to dismiss. It's still an unfunded tax cut.
I also dont agree on the 45p rate. Of the 4Bn raised in tax through this budget each year, 3Bn comes from people earning more than 100k. This is conveniently ignored in your analysis.
luke
November 25th, 2008 1:53pm Report this commentWe get a yougov poll later that will be the first post-PBR poll.
Should be BIG in determining how well osborne and co have cut through.
C Powell
November 25th, 2008 1:55pm Report this commentAh yes - but if people have more of their own money to spend they become independent of the State and where would all those public sector workers be without their clients?
IanB
November 25th, 2008 2:08pm Report this commentBut it would have meant scrapping much of the need for the tax credits system and we all know that that's Brown's baby.
William Norton
November 25th, 2008 2:11pm Report this commentJames: Yes, that's the policy they should have gone for - but they should have gone for it years ago. Or, given this govmt's inability to admit a mistake, you would have thought that they would re-jig tax credits. In the end he went for a 5% increase in the credits from next April, which is really just this Sept's RPI increase which would have happened anyway.
There may be an element of timetable. Darling can change VAT with effect from Monday because its a duty covered by the powers to vary under the regulator. Increased personal allowances for income tax would require primary legislation and re-coding everyone's PAYE, with knock-on effects on those wretched tax credits, which takes time to prepare and enact, and I wouldn't trust this Govmt to handle the potential for admin chaos caused by trying to change a tax rate half way through a financial year.
So, perhaps the story is that Darling's opting for a curious VAT cut is an admission that the tax credit system is too cumbersome and ineffective?
Gean
November 25th, 2008 3:42pm Report this commentThe VAT cut is an instant boost.
That's why its much better economically - albeit less good politically.
David Smith
November 25th, 2008 4:29pm Report this commentThe VAT cut is tiny, temporary, troublesome to implement, and utterly pointless
Charles Forsyth
November 25th, 2008 9:02pm Report this commentThe advice about the VAT cut takes a 44-page document: http://www.hmrc.gov.uk/pbr2008/vat-guide-det.pdf
That's partly a sign that the tax system is ludicrously complicated, but clearly with yesterday's announcements it will be worse.
Carol-Ann
November 25th, 2008 9:20pm Report this commentSurley this Byers policy is the sort of policy the Tories should be proposing. There is a golden opportunity here for the taking, Brown has nailed his colours to the mast.
David, UK
November 25th, 2008 9:21pm Report this commentTaking some low income people out of paying tax altogether should be one the Conservatives propose. It would be a genuine fisical stimulus unlike the VAT cut and rewards work.
Tom FD
November 25th, 2008 11:38pm Report this commentNew Labour's economic policy was dictated by Gordon Brown - I find it hard to believe they would have done anything differently with Blair at the top. When it came to Brown he was pretty much spineless. (In hindsight, of course, it's turned out he needn't have been, as Labour already has been through a Gordon-hating phase and are only through it because they completely failed to get rid of him.)
Roger Thornhill
November 26th, 2008 10:41am Report this commentYou forget. Raising tax thresholds helps the working poor. Since when do socialists want to help them? They'd only get aspirational and strive to be middle class traitors...
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