Cameron & Osborne getting into a muddle over 50p tax

General Zod

they really are in a muddle over this. It will cost money, but to have a policy ahead of the election to drop it would afford Labour an open goal at which to shoot.

The solution is glaringly obvious: abolish it in the emergency first budget, saying advice and reasearch make clear it would actually lose money. The rump of Labour would bleat, but it would quickly be forgotten.

Why Osborne feels the need to throw a bone to the public sector is beyond me.

Publius

Prudent. Anything else would play straight into the class-warriors' hands.

Steve Clark

"Why do the Conservatives need to throw a bone to the Public Services"

Because they represent 30% of the working population.

Chris lancashire

I had hoped that post-NuLab, management of the economy would revert to sense, logic and some degree of honesty.

Sticking a wage freeze on a generally overpaid public sector is sensible. Sticking to a 50p tax rate that actually loses revenue, alienates those who can, and will, either avoid it or simply leave the country,in order to appear(falsely) even-handed is stupid.

This economic mess is going to need honesty and straight dealing to sort it out and this kind of thing is pure politics not good economic management.

Hugh

Or maybe someone think that the public pay freeze will never stick!

DavidDP

Strategy and tactics are foreign words to journalists.

C

The problem is the public don't understand the laffer curve or the dynamic effects taxation has on peoples behaviour or government income. This is a reality that Cameron and Osborne have to live with and for many of the public, in the current climate, this is a popular measure. Once in government they will be able to reverse the tax using hard facts and in a way that shoots this fox once and for all. The tax is also being introduced from the beginning of April next year and so practically it would be difficult to reverse for their first financial year in any case.

So I think their attitude is pragmatic given the fiscal reality (i.e difficult to reverse immediately) and political context.

luke

Its a one year pay freeze. Lets not get too excited. They can get on with ending the 50p rate in 2011 if they want.

DavidDP

I'd also note that Fraser's IFS figures are, like the Treasury's based on assumptions which may or may not be true. Now, Fraser is very good at pointing out this flaw in the Treasury's analysis, but not in the figures he relies on, which he tends to promote to all and sundry as gospel. It may well be that tax revenue does not fall as a result of the tax, in which case getting rid of it now would be stupid. Far better to wait and see the actual effect, then one can turn around with concrete figures.

paul marchant

Clearly GZ is right to assert that to promise the abandonment of the 50p rate in advance of the election would give the Labour Party an open goal. But it would also be politically damaging if it went in the first (emergency) budget of a new government. Imagine the mischievous and mendacious class war capital that could be made. Better to adopt the Osborne line, voice misgivings as to its likely impact and then abandon it when evidence can be produced which demonstrates that this has, indeed, been baleful.

TrevorsDen

Muddle? Are you joking?

I count 7 angels dancing on this pin head'

"at an early stage." The govt themselves have said it was temporary (mind you income tax itself was originally temporary).

So?
A pay freeze is likely to last 1 year so that is the likely limit to 50p.
1 year strikes me as 'an early stage'.

This strikes me as an excellent policy. The 50p gives political balance to the pay freeze which itself gives a window for it to be removed at an early stage.

General Zod. My wife works in the public sector - amazingly so do millions of other people - er or should I say 'voters'?
My wife works amazingly hard in the public sector I should add.

R King

The need to "throw a bone" is probably because they have become to powerful but hopefully this will be curbed but it will take time. The tories will not want confrontation with the public sector from day one.

Fatbloke on tour

What a pair of chancers.
Just who is the numbers man in the Scratchy and Sniffy combo?

Both are trying to be too clever by half, they are both desperately trying to find a way to ditch the hugely popular 50p tax rate.

Sniffy really has stuck a spoke in Scratchy's whizzo super wheeze, hope the numbers can be flexxed (spun) to show a drop in the tax take of the over £150K lot, not difficult in a recession when earnings are falling. Now there is a political element on-board, keep it to show we are all in this together.

Cheap politics all round.

They really must like Horse to go to all this trouble to keep her on this side of the channel.

I fear the wheels are starting to wobble.

DavidDP

I seem to recall that, when the 50p rate was announced, at least one writer here identified it as a trap for the Tories.

So why then is this place determined to push the Tories into that trap, but constantly asking in interviews whether they will scrap the 50p rate?

Philip Walker

C: you're right, the public don't get the Laffer curve. They are helped along in their confusion by left-wing commentators who are (at least one of) dishonest and idiotic. Toynbee and Hari come in for particular hatred on that score: I think they both know exactly what they're doing, and do it shamelessly anyway. My opinion on educating people (in private conversations and so on) is that the best way to get people to see it, though, is to use news stories: take Tracey Emin and Lewis Hamilton as examples, and get them to think what happens when too many rich people leave the country.

Hawkeye

In replying to the point

"Why do the Conservatives need to throw a bone to the Public Services"

Steve Clark said: "Because they represent 30% of the working population."

What's Labour's current poll percentage? About 30% of the population. Hmmm... I wonder how many in the public services intended to vote tory anyway?

If I were the tories I'd worry about the other 70% of the population.

Kevyn Bodman

Today I will concede that Osborne has a bit of a political problem with 50p tax and the way he has dealt with it here might be the best that can be done this year.

But I would like to extend the debate.

Will nobody say that even if the 50p rate results in an increase in revenue it is still wrong?

It is wrong to take from people half the value of their work.

And it is undesirable to increase tax revenue for the government because the result will be that they will spend more.
Bigger government, more interference. This is not what we want.
Rein government in by denying them revenue.
And government spending is not an efficient way to spend money.

Will nobody say that,regardless of a potential increase in tax revenue, the 50p tax rate is wrong?
I will.

emil

trevorsden - indeed. 18K is more of a gamble than the 50p tax rate because, as you say, despite urban myth there are a lot of public servants who work very hard, often in the face of continual government meddling and meaningless targets. As well as a pay freeze Labour's final present will be a big hike in NI contributions for all workers earning 19K upwards so a double whammy for many...

Ian C

These differences are paper thin.

Cameron provided the overview: if it does not yield productively then it is no help in sorting the mess.

Osborne provided the policy detail: it'll stay for at least a year.

Nothing to get excited about here.

General Zod

You are quite right, Kevin; it is wrong for the state to take half of a man's earnings, but most people can never aspire to earn £150k and many feel that it is such a large amount that an extra 10% of tax on those earning such amounts can do no harm.

As for the public sector, I have no doubt that a large porportion of the people in it work very hard and deserve to be well paid. We all know, however, that it has become overfed and bloated with jobs of questionable value, over the last twelve years. The burden of public sector pensions is simply unaffordable, so something must be done to reduce it.

emil

Kevyn, I'm with you on 50p but then neither you or I were the real intended victims of this completely political bear trap....

Tiberius

Kevyn: you're absolutely right. 50% tax is wrong morally and is probably too far along on the Laffer curve to generate extra tax revenue. I'm sure both Cameron and Osborne recognize this.

But the Tories would be wrong to ignore this as a political issue, because it is one, which exactly why Brown and Darling dreamt it up. I've just heard someone ranting on the radio about how shocking Osborne's proposals are, and it makes sense to me to use 50% tax as a political defence. Much of the public will be more minded to take on Osborne's proposals if they have a sense (however misguided) that the "rich" are getting some heat.

50% tax is a judgement call, rather than hard-fact, but what has surprised me is that so many seem to ignore it as a political issue at all.

JONNY

'Now there is a political element on-board,'

Oooh! You don't say FATBOY.
The bastards!
But what a clever FATBOY you are for having rumbled them.
Seems to prove not being able to spell has its advantages.

Fergus Pickering

The Laffer curve is not a law. It is an observation and may not always hold good.

DavidDP

"you're right, the public don't get the Laffer curve. "

Particularly if they are on the right, it seems. The Laffer curve does not make a case for lowering taxes. It states that there is an optimum tax level below and above which revenue drops. The key is what point that is, and where the regime in question is on the curve. Both of those points rely on various assumptions.

charles hercock

Not only this.After todays disgraceful victimisation of Public Service workers they have lost me and I suspect a goodly proportion of the 5 million others

Fatbloke on tour

Used

Away and bile yer hied ya muppet.

As noted previously it is easier to find a spellchecker than an intellect.

Laffer Curve = Laugh a minute curve.
Staple of snake oil salesmen everywhere.
Voodoo economics -- you bet.

Of course it is just part of the right wing financial neverland that pasees for reality in SpectatorLand.

The poor don't want to work because their income is too high, the rich won't work because there's is too low -- Aye right!

Multi-variate issue reduced to a sound bite to suit the econnomic and political establishment.

It took Maggie 9 years to get it below 60% and look where that got us -- real 100% Tory economic crisis as people, that means you Nigel, started to imbibe their own liquid excretions.

Just pay up you bunch of tight arses.

venia

Charles hercock has it right. How dare Bullingdon Osborne freeze our money

DavidDP

The reduction in taxation rates under Thatcher increased the revenue received from higher earners. Which seems to be what you want, so you should be pleased.

DavidDP

"After todays disgraceful victimisation of Public Service workers"

What victimisation? Pay freezes and pension caps aren't much different to what is being faced by the majority of the private sector.

Fearless Frank

Fatbloke;
"...the hugely popular 50p tax rate...
Popular with whom? And why?

Fatbloke on tour

Frankie boy

Popular with the public that's who.

Why because it represents a shift towards those who gain most from society putting a reasonable share back to that society.

You really should get out more.

David Bouvier

Fatbloke - whats your view of the treasury's analysis of the 50p rate (a small increase) vs. the IFS's version (next to nothing)?

Clue: BOTH assume a laffer-curve scenario and just differ on where the top is.

But I am sure you know better...

Emil

So the difference between the Tory pay freeze in 2011 and the 1% cap announced by Labour is the grand sum of £180 a year for a worker on £18K before tax AND NI (which is already going up and will continue to do so under Labour, ). Well worth striking for or keeping the lot in who saddled us ALL with this mess. Another 5 years of this dross for under £2 a week, talk about selfish. I think everyone needs to step back and consider exactly the inheritance our glorious chancellor has left our children and grandchildren (as gold trades at 5 times the price the economic genius sold it for......)

DavidDP

W"hy because it represents a shift towards those who gain most from society putting a reasonable share back to that society."

The top 1% pay 22% of all taxation revenues. Sounds like they are putting a reasonable share back in already.

Chris lancashire

Fatbloke: I'm living proof of the curve. Earn twice as much as I did 5 years ago and pay half as much tax as I did.
Have a cigar on me.

Fearless Frank

Fatso:
Why because it represents a shift towards those who gain most from society putting a reasonable share back to that society.
Is this what they call the politics of envy?
I've never regarded any form of taxation as popular.