Labour’s 50p tax equation

Here’s one aspect of the Labour leadership contest that has passed without much comment: how many of the contenders want to extend the 50p tax rate from those earning over £150,000 to those earning over £100,000. Ed Miliband’s one of them; so is Diane Abbott; and so too – as he reminds us in interview with Left Forward Forward today – is Ed Balls. Sure, only one of these candidates has a realistic chance of becoming leader – but another could easily end up as shadow chancellor. So it’s fairly probable that this will be official Labour policy in the not-too-distant.

If so, the impetus behind the tax hike will be more presentational than anything else: Labour will sell it as both a way to reduce the deficit and as a “progressive” dividing line with the coalition. But it’s unlikely to work as smoothly as that. For starters, it could rekindle the same internal struggle that we saw when Alistair Darling was drafting his last Budget. And that’s before we get onto what it would mean for Labour’s appeal among the aspirational middle classes. David Miliband’s “broad coalition” this is not.

As for the governing coalition, I doubt they would follow Labour’s lead on this. They may have swallowed the 50p rate for those earning over £150,000, but entrenching that policy even deeper would risk mutiny by the Tory right and could fundamentally upset the delicate ecosystem of state. Besides, there’s another problem: it would start hitting ministerial salaries.