Wednesday 22 April 2009

Tax gradualism at the top - backed by most Tory voters

Alastair Darling's decision to make the new top rate for earners over £150,000 to 50 pence, rather than 45 pence, and to introduce it in April 2010 means that the Labour government will now be bringing in a progressive shift of the taxation system.

So it turns out that Fabian gradualism does get there in the end: having kept open the debate about progressive taxation over the last decade. It was the Fabian Tax Commission report back in 2000, led by my predecessor Michael Jacobs, recommended a 50p rate on earnings over £100,000. That influenced the government's strategy for increased health spending back in 2002, though shifting the argument about the top end has taken longer.

I also advocated dropping the income tax pledge from the manifesto for the 2005 election, arguing that Labour needed to break the taboo on discussing tax at the very top.

Will the Conservative Party support the new top rate? My instinctive prediction at the time of the initial annoucement was that they would try to do so quietly, because the vocal opposition of some does not reflect the opinions of Conservative voters, a majority of whom back tax fairness at the top end.

So I hope we don't have much more of this "death of New Labour" nonsense. It was clear, before the current recession, that there were strong majorities across voters for all social classes, income groups and political parties for higher taxation at the very top. And the recession has strengthened support for those principles.


Anonymous said...


Whilst I'm delighted by the announcement, and also like the way it has put the Tory's in a tough spot (although Cameron thrashed the Govt at PMQs and post-budget qs).

But I think you may be taking a little too much credit for the Fabians here. I don't disagree that you did a sterling job keeping progressive tax on the agenda - but the article sort of implies this is first and foremost a Fabian victory.

I'm inclined to think the gaping hole in public finances also has something to do with it. After all, principle is rarely found without pragmatism by its side.

Nonetheless, this is a good day for tax progressivists, so let's all be pleased about that.

Robert said...

So we have enough people earning £150,000 a year to pay back the debts, nope so who pays it back then, people on £14,000 a year.

If he had said it was £100,000 a year I might have said good, sadly £150,000 god help us all. New Bloody Labour.

Sunder Katwala said...


Thanks. Of course, you are right.

The point of the Fabian Commission was also very much that we needed to have the confidence to link arguments about taxation and about spending, and to have a greater sense of public connection between the two. That was popular when it was done for the NHS. The case for less taxation and less spending is much less popular than its vocal advocates think.

This is more reluctant. It remains important to show that the taboo about top earnings could be broken, as otherwise that would have been a permanent shift in public politics, despite decent public support for a different approach. And the pensions and other changes are important in exemplifying a fairness agenda which most people will think right.