Friday, 24 April 2009

Significant rise in support for 50p rate

The Daily Telegraph has a post-budget YouGov poll which mostly offers good news for the Conservatives, who have an 18 point lead in the opinion polls.

46% believed the budget was not fair while 32% believed it was fair.

An interesting detail is a significant sixteen point rise in public support for the 50p tax rate on earnings over £150,000, since the measure has been announced.

That was backed by 68% of the public, according to the Telegraph report of their post-budget YouGov poll.

As Alastair Darling sat down, I noted that our YouGov/Fabian poll at the end of November 2008 found 52% support for that measure, with 28% against, whereas the 45p top rate which had been announced in the pre-budget report had 76% support with 13% against. I wondered whether announcing the move would increase support for it, and give a result closer to that on the 50p rate.

It seems clear that the narrow plurality of Tory voters 38-45 against the measure will now be a plurality in favour. (I will update this post with the party breakdowns if and when I can get them).

One can read this in different ways.

Fabian social democrats can note that the government are to some extent makers as well as takers of public opinion. It is difficult to stand up the 'abandoning the centre-ground' charge for a move which has such wide public support. New Labour made the income tax issue totemic. They did not need to. A more progressive tax structure could easily be defended in New Labour terms, as the windfall tax was.

But the right can read it differently. Tim Montgomerie of ConservativeHome (as a critic of Tory acquiescence to the move) could legitimately argue that the failure to contest an increase in the top rate of taxation both 'ratifies' a change by making it part of the new status quo and centre-ground, weakening the political taboo on higher taxes which the right wishes to keep.

Labour took the wrong lesson from its 1992 defeat. But the problem was trust in confidence in Labour governing, rather more than the specific tax changes proposed. Indeed, 63% of voters in 1997 expected Labour to raise taxes, compared to 66% in 1992, and this was again the case in 2001. As Mark Gill wrote in Fabian Review back in 2005 in a piece examining myths about tax and the electorate:

All told, the voters elected Tony Blair with a landslide in 1997, expecting him to increase taxes, and re-elected him in 2001 believing that his Government had done so, and would do so again.

There is a decent centrist 'one nation' challenge to the idea that those earning £250,000 in the city must not pay a higher rate than deputy headteachers and senior police officers earning £45,000.


Bearded Socialist said...

A really interesting breakdown. I still think that New Labour has been scared of its own shadow, as the tax issue shows. Maybe now they will feel more able to make the case for higher taxes


I am in support in taxing the rich and as a avid labour supporter I say to labour hurry up and win the next general elections. You may wish to log on to

Calix said...

I suppose now that the myth that the city is a one-way money making machine from which we will all benefit has been shattered, even reversed (i.e. it can be a loss making machine), there is no justification for not taxing the super rich. Suddenly, everyone thinks it is the right thing to do and it is relatively easy to make the case. However, as Sunder says, we should have made the case earlier, but one of the key planks behind New Labour was to leave the City alone to make money. This is a key weakness because when the City fails it inevitably rubs off on the administration who believed in it so fully.

I guess the shift in public opinion is partly selfish. People no longer believe they are on a straight-forward route to ever increasing wealth, and so now the idea of taxing the super rich doesn't destroy their own aspirations. Maybe I am being too cynical...

Captain Fun said...

While I think the 50% rate is tactically a master stroke, and also in theory targets the 'payment' for recession at those most likely to have caused it (bankers) (at least in popular mythology), my own personal theory on taxation, is that a single rate is fair. You earn a little you pay a percentage; you earn a lot, you pay a lot - but the same percentage.

Differential tax rates for higher earners only fuel ridiculously high pay increases. If an employee takes home £500 out of a £1000 rise, then you're going to need to offer £2,000 to give the same incentive, as if they'd got all of it. Meanwhile the low earner and the Daily Mail only look at the figure before tax.

It worries me that I think my belief on this issue has probably more in common with Tory policy than Labour !

Robert said...

And to all those avid New labour supporters to ensure Gordon's message comes out right, he sends Mandelson out, look people this 50p tax is needed now, we have to do it, do not worry it will not last long , New labour will reduce it again soon fast in fact, once we get the ass holes scrounging scum back to work, you know the work shy the lazy disabled.

Mandy says the 50p is temporary.

Sunder Katwala said...

Thanks for comments. CaptainFun asks what the case against flat taxes is. I am going to let somebody else go for the philosophical case for having progressive banding.

The problem of fairness in practical terms, and the political problem of trying to change to such a system, seem clear.

If a flat income tax was to bring in similar revenue to current income tax, it would presumably be somewhere between the basic and the higher rate, and those currently paying the 20p rate would be taxed much more heavily to reduce the taxes of those currently paying the higher rate.

Most people believe that would be unfair, primarily because of the principle of the ability to contribute.

So those who propose a flat rate suggest it should be where the current basic rate is. This means a fall in revenue, requiring greater taxes elsewhere, or less spending or more borrowing.

Also, almost everybody believes in having a tax-free threshold before tax is payable. The Adam Smith Institute have proposed raising this considerably, before a flat tax then kicks in. But that is based on an argument which is in many ways the opposite of the flat tax principle. Again, this approach would see less revenue and less spendng, and part of the poltiics is to popularise that approach.

Both the arguments and numbers are examined in this
report (2006) from the Tax Justice network.

Captain Fun said...

Many thanks for your detailed response Sunder. I suspected it would be rather difficult to move to that position quickly.

I'll have a look at your posted link to Mark Gill's article and the report you mention above.

I was recently with colleagues in Copenhagen, Denmark where income taxes seem to be between 40% and 67%. Everyone we spoke to seemed happy, if not proud to pay this. But whatever the merits or otherwise of this, I can not imagine the culture in the UK ever allowing that system to be introduced here.