Given that the income tax threshold will rise to £10,000 over the course of the parliament, designed to help lower earners, we can take it that there will be no tax cuts for the well-off and hard pressed middle classes. So the 50 percent rate stays, which is not wholly foolish strategically as Labour would preserve it. The squeezed middle classes pose more of a problem for the coalition. Their benefits and tax credits will be cut, tax on their consumption is rising, tax on the gains of their long-term investments has risen and may rise again and there is to be no relief on their income tax. A Labour party led by Tony Blair would have exploited this gap in the coalition’s defences.
Alexander may be preparing the ground for the time when he can announce that the middle class have done their bit and here is a massive tax cut, welcome back to the sunlit uplands. But these are bald statements and I doubt Alexander would have made them were it not for the IFS describing the Budget as ‘regressive’. The government emphasises, for want of a better expression, that we are all in this together. Its rhetoric is still determined by the IFS’ definition of the term ‘progressive’ and the assumption that it is sufficient just to bawl on about deficit reduction. It is not. The government must explain why its reforms and your taxes will transform public services for the better and restore health to the nation’s finances.