Wednesday 26 November 2008

Tory leadership accepts new top rate. Does the party?

So what position will David Cameron and George Osborne take on a new top rate of tax for the top 1% of earners?

They are preparing to accept it.

Not being a Tory myself, I couldn’t easily predict which way they would jump (though my immediate hunch was they would not oppose it). So I put that question to Mr Iain Dale - one of the nicer that Tories I know and the grandest fromage in the Tory blogosphere - as the news broke on Sunday night, leading Mr Dale to be among the first to declare the "Death of New Labour'.

"I am certain that a clear majority of Tory voters will back this .. Are you sure you know which way your leadership will jump on this", I asked.

“Yes, I am sure”, he replied.

As Iain will have much, much better sources than I do, I would be interested to know if he’s still just as sure as he was about that by the middle of this week.

Some confusion could creep in, because the Tory frontbench has been briefing the opposite to the broadsheets.

Financial Times
David Cameron will not pledge to reverse the 45 per cent income tax rate for high earners, senior Tories said on Monday … We’re not falling into a classic Labour trap by opposing the 45 per cent rate and then being accused by Gordon Brown of only wanting to help our rich friends,” a senior Tory said.

The Guardian
Significantly, the Tories, focusing on the projected borrowing figures, said they would not fall into the trap of opposing the new 45% rate of income tax, adding that it would not be a priority to reverse the measure if they came to power in 2010.

The Independent
Senior Tories said they would not walk into a "trap" set by Gordon Brown where they appeared to oppose tax rises for the better off. "Reversing this will not be a priority for a Conservative government," one Tory source said. "We do not support the increases in income tax, but our priority will be to reduce the tax burden on low-income families."

This doesn’t make much sense, does it?

Labour proposes that the new rate comes in after the next election, because of its 2005 manifesto pledge on income tax rates. If the Conservatives were to win, it will not yet have happened. They would have to decide to continue with its introduction, or to drop it. Will their manifesto really be silent on what we have been told is one of the most significant tax changes in British politics for twenty years?

If you believed – as I believe most Conservatives do – that this was the wrong policy, you should say so. If you believe there are strong moral, economic and political arguments against higher taxation on top earners, then you would make that case. After all, your luck would really, really be in if your political opponents had declared the death of New Labour, vacated the centre-ground of British politics, abandoned Middle England and all the rest of the things you have all been saying over the last 48 hours.

Where’s the trap in that? It sounds like more of an open goal.

If that’s right, all Dave and George would have to do is to bang the ball into the net - stand up for their and your principles, oppose the policy, occupy the centre-ground and be carried shoulder high by the grateful denizens of Middle England into Downing Street.

So, what’s stopping them?

Are they insufficiently committed to the argument for lower taxes?

Having opened up the dividing lines on tax, spend and borrowing, are they about to start blurring them again?

Or is it just that they realise that it might not quite be to ditch New Labour, lurch left and desert Middle England if you do something that a majority of voters across all parties, including on the right, in all social classes and in all income groups think is fair?

If that is the Tory leadership’s strategic instinct, I can see why they are keeping it as quiet as they can. But the argument inside their own party is yet to begin.

After all, it is only a week since the Tory netroots won their most significant strategic and policy victory, as the leadership finally responded to the concerted campaign – admirably marshalled by Tim Montgomerie of ConservativeHome, with strong support from Fraser Nelson and friends in the CoffeeHouse, and much other right-wing commentary and activism – to persuade them to ditch their support for Labour’s spending plans.

But that might feel like a pretty pyrrhic victory if – within a week – they were preparing to re-impale themselves on a New Labour tax increase for top earners.

There has been a significant argument about progressive taxation within New Labour over a decade. The largest intellectual contribution came from my predecessor Michael Jacobs when he was running the Fabian Society, and there was support from Robin Cook, Peter Hain, Tony Giddens, Chris Leslie and others to keep the argument about taxation and inequality at the top alive.

Within Labour, and in the long-run, the result has been a significant victory for Fabian gradualism.

But we could be back to permeation too - and to Keith Joseph’s ratchet effect - if, when the moment came, the key battle was won without the Tory leadership firing a shot.

For now, the question remains: do the Conservative Party want to oppose a new top rate of tax on the top 1% of earners, or not?

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