One letter, that’s all it takes. After 38 City types wrote a letter to the Daily
Telegraph this morning, urging George Osborne to drop the 50p rate of income tax, Westminster types have been chirruping on about it ever since. All three party leaders have had their say, except,
so far as I can tell, Ed Miliband — although Ed Balls stood in for him
anyway.
Of all the responses, it is David Cameron’s that is the most noteworthy and perhaps even surprising. Speaking about deficit reduction on the Jeremy Vine Show earlier, the PM was unequivocal: ‘We have to try and do this in a way that is fair so that the broadest backs bear the biggest burden,’ he said, ‘That’s why we haven’t changed, for instance, the 50p tax rate.’ Which is to say, he matched Nick Clegg in his rhetoric against cutting the 50p rate. And he exceeded Balls, who would only say, with unusual ambivalence, that ‘I don’t think that is the right stimulus myself’.
You might think this isn’t too strange: a Prime Minister has to stand up for his government’s existing policy, after all — and he has done so before. But this is coming on the back of contrasting, recent efforts to reassure business leaders about 50p. As much as a fiscal exercise, the review that George Osborne announced earlier this year was a presentational device. It said to the suits: ‘Don’t worry, we hear your concerns, and if we find that 50p doesn’t raise anything, then you’ll get your lower rate back’. So it’s striking that Cameron didn’t try to make a similar point today.
The Treasury’s policy is still to wait for the outcome of the review, expected next April, and then make a decision. But Cameron’s words add a smidgen more uncertainty to the process. Will the PM be minded to retain 50p, in the name of fairness, so long as it makes even the tiniest positive sum for the Exchequer? Would he do so in the face of arguments that the 50p rate has wider, negative effects which negate all that? If so, expect the City to get out its letter writing set once again.
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