Tuesday 23 November 2010

Most LibDems reject Clegg's brave but unpopular stand on tax at the top

Nick Clegg's Hugo Young lecture tonight is built on very shaky philosophical foundations, as Next Left's pre-match analysis has set out.

But let us say this in praise of Nick Clegg.

Politicians are often criticised for simply chasing the centre-ground of public opinion. Not Nick Clegg. For a man who has mislaid half of his voters in six months, he remains admirably willing to strike an unpopular pose which most of his remaining voters reject, albeit that this blog can not make common cause with him on the specific issue.

Clegg argues vociferously against the principle of a 50p tax rate on earnings above £150,000, writing in The Guardian that a very big issue where his "new progressives" differ from "old" is in having the courage to argue for reversing higher taxes on the top 1% of earners even at a time when, he tells us, "the public coffers are empty" and demand "sharp choices".

There are big differences on tax, too. Ed Miliband told the Guardian yesterday that the UK is a "fundamentally unequal society". I agree. He also says that "for some people the gap between the dreams that seem to be on offer and their ability to realise them is wider than it's ever been before".

Again, I agree. The UK is unequal in precisely the way he identifies – in terms of social mobility, life chances and opportunity to move ahead ...

Rather than focusing on social mobility, Miliband grasps at the retention of the 50p top tax rate as his solution. I'm not sure that the members of his own front bench agree with him about this. It is a classic example of old progressive myopia, making a shibboleth of one aspect of the tax system rather than looking at it in the round. Britain's tax system needs real reform, not political posturing.

For this, Clegg should certainly expect to be the darling of The Spectator yet again. (Perhaps they will hail him as heir to Thatcher once more). But he may find that most of his "new progressive" troops will be those firmly on the Thatcherite right, who are frustrated that the Cameron-Osborne government have been to date rather wary about scrapping the top rate. Perhaps Clegg has offered to act as an outrider, trying to soften opposition and to make it easier for the Tories join in.

But I fear that many of the commentators who will write about Clegg's speech will not give him sufficient credit and acknowledge just how courageously far out of step he is with public opinion, as well as with his own party's supporters. The 50p tax rate is backed by clear majorities of the supporters of every political party, those in every social class, age group and region. But this is rarely reflected given how potent the tax myths of the imaginary centre-ground are with the commentariat.

Indeed 53% of those still sticking with the LibDems would support a 60p top rate on earnings over £150,000 (with 28% against), a proposition also backed by 50% of Tory voters and 54% of the public overall with 29% against. Support for 60p rises to 59% among those who voted LibDem at May's General election, with 26% opposed. I blogged at the time of that ComRes about why I do not agree with the public majority in favour of a 60p top rate on the top 1% of earners, though I am not nearly so far from the centre of public opinion as Clegg is in his arguing so vigorously against 50p too.

In 2009, 69% of LibDems were among the 61% of voters who supported a £100,000 starting rate for the 50p tax, which strikes me as a more plausible proposal (albeit one which is unlikely to come about, given that so-called "Red Ed" remains firmly with the public minority in opposing that modest tax hike for the top 2%).

That "the Coalition Government understands the interests of the wealthy better than the interests of ordinary people" is something which 46% of voters supported (ComRes, mid-October 2010), including 45% of those still supporting the LibDems and 52% of those who voted LibDem in May.

While Clegg's unpopular advocacy highlighting taxes for the top 1% as his big disagreement with Ed Miliband will not in itself help to overturn that perception, Nick Clegg will no doubt be working out some other argument to persuade his voters that they have got him entirely wrong on that one.


Nick Clegg still seems in denial about the fact that his focus on raising the tax threshold is regressive (and especially so when this requires a VAT hike to fund it).

The IFS have confirmed that the bulk of the gains accrue to childless families in the top half of the income distribution, particularly couples who both work.

This is hardly a surprise: the argument that is was pro-poor was comprehensively demolished by David Willetts five years ago, and the progressive measures by which the LibDems hoped to fund this change have mostly now been ditched.

Indeed, this graph captures one big difference between Labour "old progressives" and Clegg's "new progressives": Labour's tax changes reduced inequality, while the Coalition's discretionary tax choices are increasing it.

But Nick Clegg appears to be firmly following Julian Glover's advocacy in The Guardian yesterday that it will be essential to ignore statistical evidence if the Coalition is to keep on whistling a happy tune.

On Tuesday Nick Clegg will give the Hugo Young Memorial lecture at the Guardian premises, and try to persuade his audience that the government draws its strength from ideology, not opportunism. He will step away from government by measurement and defend the liberal idea of individual human advancement


A society reliant on statistical calculation can never be optimistic; all we ever see are the limits and the failures.

1 comment:

Alix said...

"It is a classic example of old progressive myopia, making a shibboleth of one aspect of the tax system rather than looking at it in the round. Britain's tax system needs real reform, not political posturing."

He's right. It is. I doubt he actually cares two hoots either way whether the top rate is 50% or 40%. What he's saying is that it's stupid to pretend that the precise whereabouts of the higher rate band constitutes some sort of paradigm shift towads fairness in the tax system. And he's absolutely right. Rates are the icing on the cake - they take up maybe 10 lines of text in heaven knows how many hundreds of pages of legislation. Moving one rate, and doing nothing else, is not progressive.

Is there another bit you haven't quoted where he actually "argues vociferously against the principle of a 50p tax rate", by the way? Because in the quote you provide, he just (correctly) attacks Labour's apparent belief that it constitutes the be-all and end-all of progressive tax reform.

Raising wealth taxes and a thorough wrestle with the purpose and scope of various reliefs on them are what's required for progressive reform of the tax system. You could feasibly write about how the coalition government looks unlikely to tackle it (ie, Tories dropped their IHT threshold raise and raised CGT, but it seems very unlikely that they'll go further on either position; tax reform overall remains to be seen, but I don't hold out much hope while it consists of "crackdowns" rather than actual proposals for changing the law).

Alternatively, you could actually respond to Clegg's charge and defend Labour's putting the higher rate band at the heart of tax reform when it's so obvious peripheral. Or argue that he is characterising the Labour position unfairly. Either would work. This does not.