Matthew Dancona

The politics of a 50p top rate

The politics of a 50p top rate
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This was an astonishing Budget for all sorts of reasons – mostly connected to the proposed levels of debt. But I was most struck by the political symmetry of Darling’s decision to raise the top rate of tax to 50 per cent for those earning more than £150,000 pa.

In his 1998 book The Unfinished Revolution – a book that was combed for lessons by the Cameroons in their early days at the helm - Philip Gould wrote the following:

“I have never had any doubt: increasing the top rate put us at political risk. Blair was always instinctively against raising the top rate, Brown more inclined to keep the option open. In meetings they would discuss it as a matter of principle: did increasing the top rate reveal your instincts as a tax-raising party, or did it not? Blair thought it did, Brown though it did not.”

As Robert Peston, Brown’s best biographer puts it:

“The danger [Brown] foresaw of giving into the Party’s opinion poll pundits – such as Gould – by closing down this tax option was that over time he would be forced to abandon his ability as a future Chancellor to raise any taxes, simply for fear of upsetting potential voters. He would be a neutered Chancellor, unable to pull any tax levers to manage the economy or engineer social change.”

Blair won the battle in 1996-97, quashing Brown’s proposal for a new top rate of 50p for top earners. Hence an era of “stealth taxes” and the not-so-stealthy hike in National Insurance to pay for NHS “investment”. But today Brown – now in Number Ten – gets the 50p rate he craved back in 1996. High tax is back, openly and proudly, the bitter wages of an economic crisis. Nothing stealthy about it. Nothing “New Labour” about it. All over Britain, the pips are about to squeak.