What should be Tory policy on the 45p tax band?

5pm update:

THE RESULTS OF TODAY'S POLL

• 41% of 711 people who answered the poll said the Conservatives should oppose the 45% tax band.
• 16% said we should support the band.
• 39% said we should wait and see.

WE'LL BE DEBATING ANOTHER IMPLICATION OF THE PBR IN THE MORNING.

***

The Conservative Party's clearest statement on Labour's plan to impose a 45p income tax band on those earning over £150,000 was made by our Number 2 Treasury spokesman, Philip Hammond.  This is what he said (as recorded by Coffee House):

“Clearly if the government is going to announce a huge package of additional borrowing today there will have to be large tax rises after the election.  Of course people on higher incomes will have to pay their share of that but don’t let anybody be deluded by the political spin into thinking that the black hole that Labour has created will be filled by a tax on a really quite small number of very higher earners, it won't.  We are talking about a couple of billions of pounds, the hole is likely to be a hundred billon pounds big, its going to require tax rises across the board and I’m afraid it will be ordinary families and businesses that are hit not just the very rich.”

What do you think the Tory position should be?

VOTE IN OUR SPECIAL POLL HERE.

Comments

[GB£.com]

Well the non-dom levy proposed by George Osborne aims to raise 3.5 billion, which is about double the combined 45p + government's non-dom targets, so the Tories are planning to bash the rich a lot more than Labour anyway.

So, you could pledge to drop it and point out that your non-dom levy will actually raise a lot more from the rich than the government's combined measures and will save the government more admin costs with a more simplified tax system.

However, back in the real world, Osborne's non-dom income targets are pure fantasy anyway, so you may as well continue the approach of making policy based on this week's political wind.

Any news whether the 'grow public sector spending slower than Labour' still applies since the pbr?

[Vincent Wall]

Just for once let's take the high road and say this is bad for the economy and will make Britain uncompetitive.

[Felicity Mountjoy]

We MUST NOT fall into Labour's trap by deciding anything on this. They only announced it to cause disunity in our ranks and in the highest hopes to represent us as the rich man's best friend.

[Martin Jee]

Clearly the Tories need to oppose the 45p tax band.

And we should not make the case based on whether we are the "party of the rich" or not - that is the battle ground LABOUR have chosen. For God's sake, we need to stop chasing our tails, stop being afraid of our own shadows and go out there and take the fight to the enemy. This is not a case pro or anti rich (the biggest load of Marxist claptrap ever), but a case of rewarding success.

Conservatives should argue that Britain, now more than ever, needs a culture that encourages success, and rewards it. If you do well in life, if you've made more good decisions than bad ones you should be able to keep the benefits. And the state should reward the successful as the people who create the wealth in this country, who create the jobs and the successful businesses, and who generate the bulk of the taxes Governments need to survive.

[Malcolm Dunn]

This is a political trap set by Brown, let's not fall into it. The chances are that we'll inherit a wrecked economy anyway where there will have to be very large spending cuts and tax rises for everyone.Borrowing on this scale cannot last long.No one will lend.

[GB£.com]

I see that CCHQ has updated the Economy policy page on conservatives.com.

Why are the two firm policies, the non-dom levy and the 'grow public sector spending slower than Labour' not listed?

Have these two policies been dropped? I am only seeking a simple clarification.

[Stuart M.]

Perhaps we should scrap income tax and replace it with something called

"The Labour Government Debt Repayment Tax"

Perhaps then people will get the point.

[Stewart Geddes]

Far more important than specifying tax rises is to emphasise that the spending that requires the taxes needs to be cut back. After 11 years of labour profligacy, you are not telling me that all (or even most) the government spending is carried out wisely and efficiently.

The principle should be that we will look for spending efficiency to reduce the need for tax rises, and no we cannot specify where those savings will be until we see the books.

[David Belchamber]

Say nothing about it now.

If the conservatives win the next GE, they will have to take stock overall before drawing up a budget. Taking over from Labour, there are bound to be all sorts of black holes that need a comprehensive review to sort out.

Given the behaviour of certain bankers in the recent past and their bonuses, public opinion in a recession is not in favour of those who are still reasonably well off.

[Norm Brainer]

Oppose and pledge to introduce some flat-tax scheme.

As the finances are in such disarray, if there's a time to make a big change then it's now, and as it will be an 'all change' thing there's less chance of the poor moaning about the rich and vice-versa.

The 45p thing is just a red herring anyway as it won't bring in enough, but neither should we let them get away with little measures here and there to bring in their socialism by the back door while everyone else is looking for a plug to fill the big black hole.

[Tim Montgomerie]

I like your idea Stuart!

[Eveleigh Moore-Dutton]

I agree with Felicity Mountjoy. We need to make it clear that we are a fair minded party - not prioritising one group above others. We need to be on the side of those who try to live decent lives, caring for their families and their communities and working hard to these ends no matter whether they are rich or just plain struggling. Lets face it, under Brown and his Darling boy, there will be even more in the 'struggling' category and we need to offer them hope.

[Chris]

I believe I read somewhere that Osbourne has said that we oppose the new tax band, but repealing it would not be a main priority in government

[Pilko]

Why £150k, why not £120k, why not £72,356?

Where's the actual maths and income generation argument behind this cut off point?

This should be opposed.

[michele imperi]

The next elections will see the UK economy in a disastrous situation. The Conservative party will need to seek a mandate for radical change regarding how the economy is managed . It may not be popular but we will need to spell out clearly which mistakes were made and why and how we will change direction. A tax on wealth creator is not an incentive for recovery and probably will further depress the economy and send all the wrong signals . If the general public does not understand those simple messages and decides to follow Gordon Brown's road to Argentina than they will have the leadership they deserve .

[Cleethorpes Rock]

Oppose on the basis that:

- It won't raise much money and is designed to make 99% of Britons think they won't have to pay back any of Brown's £1 TRILLION debt.

- It won't address the problem we're facing NOW, namely a lack of interbank and bank-to-business lending.

- It does nothing to keep real money in the pockets of lower earners. Priority should be on reducing taxes for the lower-paid who don't benefit as much from VAT reductions as the rich.

Add to this he caveat that of course the wealthy should pay more than the poor, but we need to have a system that works and reflects the global economy as it is today, not one that takes us back to the 70s.

[Bill]

Labour built the economy on a debt based pack of card. The rich did very well amongst other things from inflated asset prices and quite a few tax breaks. Labour also helped those not so well off with tax credits and a public sector bonanza. Those caught in the middle to a large extent paid an unfair proportion for this and will continue to do so. It is a shame the Tory opposition failed to properly attack Labour's disastrous policies. I suspect this omission is a major factor in explaining the paradoxical support for Labour at the moment. Labour may well have failed to "fix the roof whilst the sun was shining" but what were the Tories doing st the same time. Discuss.

[resident leftie]

What should you do? Oppose it. It's against the class interest of the people who fund and run and, to a lesser extent, vote for the Tory party. It concedes ideological ground to Labour. If you give way on this, it's the thin end of the socialist wedge. The thing to consider is WWMTD (What Would Margaret Thatcher Do?)

What would an opportunist do? My guess is Cameron will prevaricate, and say something like "It's far too early for us to make firm tax commitments for a future parliament. We haven't seen the books and the country is mired in debt. We'll have a terrible mess to sort out, and it will be tough on everyone. Just know, that unlike Labour, we are natrally a tax cutting party who want hard-working families to keep as much as possible."

I am truly interested on Tory opinions on the topic of redistributive tax. I'd like to know, is it just the pragmatic argument (doesn't raise more tax) or do you believe the ideological argument that it is wrong in principle to tax wealthy people more?

So WWMTD? Here's an excerpt from a speech of hers:

"But we should always ask whether there are not other items of public expenditure which can be cut before tax increases are contemplated. Tax rates — particularly taxes applying to top earners who are internationally mobile — are intensely competitive. To increase top tax rates does not necessarily enlarge the tax take. Such people can easily make alternative arrangements.

It was my experience as Prime Minister of the United Kingdom that when the top rate of tax was reduced from 83 per cent to 40 per cent the proportion of total income tax paid by the top 5 per cent rose by several percentage points"

[JS]

The party should oppose this tooth and nail 100 per cent. It should be made clear that the Conservative party is a party of low taxation, low public expenditure, less government interference in people's lives and which strongly favours the creation of personal wealth and personal freedoms. Let more citizens keep more of what they earn by taxing income less and putting the emphasis on any tax increases on spending, thus letting people have the choice of paying it or not. It is high time the party stood up more for its natural supporters and bothered less about those who will never vote Conservative. That is the policy which secured the victories of the Thatcher years and that is what will gain victory again. Leave the politics of spite, envy and the nanny state to Labour.

[Western Star]

"What should you do? Oppose it."

I think, coming from Resident Leftie, this gives us a big clue! I agree with those who believe that to do anything would be leading us straight into a large elephant trap of Brown's making.

[Peter Buss]

Camerons very great skill has been attracting voters from the Centre Ground.Even the poll dips show that we now have a very solid base of 40% - riches compared to where we have been during the past 15 years.The Brown bounce has been mainly at the expense of the Lib/Dems.

It is crucisl that we remain on the Centre/Right if we are to gain power. The Brown charge of "unfairnes/uncaring" has the potential to have geat traction with the centre/swing voters. Camerons tax plans must not jeopardise the great gains already made. The 45% tax rate has 72% approval in the latest poll.

As all will have to pay more taxes we really shouldn't make an issue of it.Exactly the same goes with our Inheritance Tax proposals which if we make this a priority it will just reinforce a view that we are only interested in a small part of the electorate. Fine and obtuse economic theories will be as nought compared to the sense of fairness in the DNA of the British electorate.

I would myself switch tax to indirect taxation and concentrate all on getting as many people out of paying income tax altogether.Thats basically what Maggie did.

[YMT]

In the words of Admiral Ackbar, "It's a trap!"

Ignore it for now, Labour are setting down mines for us to intentionally set off.

[Graeme Archer]

Unless Brown reverses his own pension rules, anyone on over 150k will surely commit that part of their pre-tax income which would be taxed at the new high rate into a SIPP. Which attracts relief at 40%. So Brown's move will cost money, not raise it.

[GB£.com]

Lord Lawson unequivocally said the 45p tax rate should be dropped on Newsnight.

[rugfish]

Rescue the EU rebates and planing away government spending rounds up to £12 billion just using Brown's own figures of saving £5 billion on govt spending. I make that £60 billion over 5 years saved and I haven't added ID Cards, 2 air craft carriers, an NHS computer or any government contractors or the Heathrow runway or the clawing back of none spent VAT by putting it back to 17.5% yet.

I think the case is well set to talk about cuts in Brown's spending plans to pay for this instead of "burdening taxpayers with unfair rises".

Get a big jotter out and make a list of stuff to cut why don't you, and also begin to tackle public sector gold plated pensions which are a true blight on this nations finances CAUSED by Labour again.

Drop stamp duty or change it to the seller, bring back MIRAS, inject a TAX CUT for the low paid and THEN you'll have the makings of clobbering this poxy government on all fronts and still helping the economy whilst ruling out their unfair taxes EXCEPT to non-doms and those squatting in their tax havens which SHOULD but are not being taxed by Brown.

Someone get their finger out there will they please !!

[Mapa]

state should support ...'who generate the bulk of the taxes'

i.e. 98% of working population as only 2% are on the 150k

a solution is tax the non-doms, close the 'haven' loopholes and be radical by reducing the high band to 35% and the standard rate to 15%

[Matt Wright]

Ignore Labour spin and focus on what we would do for the low paid. Taking the battle to an enemy is always the best strategy.

[Malcolm Dunn]

Very true Graeme Archer!

[Raj]

GB£, you can ask as much as you like about policy but the response will probably be silence here as Tim is not an official spokesman. You have to ask through the usual channels.

I agree with the majority of views here that it's a ploy designed to cause disharmony. Either focus on the government's failings and what else we would do, or dismiss it as an irrelevance that will generate little money. Don't get sucked into whether a Conservative government would maintain it or keep it. I like the "we will have to see what the real state of the public finances are before we make a decision" argument.

[rugfish]

It might have also escaped the notice of politicians but thousands of people are being laid off every day and they can't all become tattie pickers !

What on earth is Brown ACTUALLY doing to make funds available for business loans - where are those figures and how much Chateau Nerf Du Pap has Mandelson been swallowing at his dinner parties with "business people" ? and who are these business people, and was the chairman of Woolies among them because that is one deserving case where a 'tiddly couple of hundred million' could be 'loaned' to replace the loan which GMAC called in which led to its untimely demise.

WHY can the government not issue a guarantee to Woolies bankers then and prevent 30,000 mams and dads going on the dole ? - That isn't going to help child poverty figures Mr Brown ( you clot ), so who is asking these questions please or do you just trust Mandelson to inform you once he's managed to garner kudos in the public eye with his slick spin backed by his mate Campbell ???

You need ANGER management lessons to learn how to be angry about the mess we're in and switch people on here how you WILL solve it but not with a whopping great tax burden hidden by a few crumbs to pensioners who incidentally don't have the pensions they need because again Brown robbed them !!!

Then I can calm down a bit !

[Deborah]

In days gone by, higher rate tax was for the real high-earners. Not any more. The band threshold has been held down so that many ordinary "hard-working families" are now paying 40%.
It may be difficult to think about at the moment, but the long term aim should be to reduce the number of people on higher rate. Increasing the higher rate is moving in the wrong direction.

[The Wilted Rose]

Let's face it: 45p is only the tip of the iceberg! We will all end up paying higher taxes, so we have to trim our bloated state and stop future fiscal irresponsibility.

[Mark Fulford]

My view is that 45p is a distraction from what we should be trying to achieve: a simplified and flatter tax system. Unfortunately this isn’t among your options.

What we absolutely must not do is allows tax to be an issue of rich versus poor, with the parties choosing on which side of that artificial divide they stand. Nor should we allow the argument to be framed around "45p".

Conservatives should be proposing a radical reform of tax to ensure that nobody pays more than they can afford and that anybody only has to pay their fair share. It should be as simple as this:

1. Income taxes will not cut in at all until you are on a reasonable living wage, taking into consideration your dependents.

2. Once you are paying tax it should be at an equal percentage of taxable income, regardless of how much that is.

Under the current system, the clarity of your tax rate is confused and obscured by allowances, credits, etc. If there are cases of the poor genuinely paying more, as a percentage, than the rich, this is a terrible failure of the Labour’s current tax system.

[Iain]

The Conservatives shouldn't get hung up on the issue, and from the line I've heard them take I think they have got it about right in saying that they have more pressing priorities then this tax rate hike.

They could expand that by suggesting they are more concerned about all the people who have been ensared in the tax bands because Brown didn't raise the bands and allowances, these people have been hit by a 20% tax hike. In doing this the Conservatives put the spot light back on Brown's stealth taxation, and putting the Conservatives on the side of working people, not just the rich.

[GB£.com]

"GB£, you can ask as much as you like about policy but the response will probably be silence here as Tim is not an official spokesman. You have to ask through the usual channels."

If anyone knew Raj, I'm sure they'd say, and there is as much chance of getting a straight answer directly from CCHQ as there is of Brown reducing the nation's debt.

[strapworld]

Surely the policy is that the Conservatives are not bound by the Labour Government's spending plans. the 45p tax hike is all part and parcel of their failed and failing policies. So we just reiterate we are not bound by it!

[pp]

Don't base policy on short term tactical issues - they will come back to bite you.

Apply tory principals and the answer will emerge.

What is wrong with 45p tax? Is it the figure? when it kicks in? the addition of an other band? who it impacts? the likely action of those who it impacts? the cost of additional complexity (the 10p band was supposedly ditched for 'simplicity')? the amount it will raise for the effort required to collect it?

What is wrong with it? If you can't find anything then may be it is OK...

Think on this, before the last budget there were three bands - 10%, 20%, 40% - again there are to be three bands but now - 20%, 40%, 45%.

Looks to me that:
first band has gone from 10% to 20%,
second band from 20% to 40%
and top band 40% to 45%.

Ok, thresholds may have moved... but even so.. bottom level was 10% now 20% - top rate was 40% now 45% - everyones a loser under labour.

[vaughan davies]

Any comments on the 45p tax rate should be within the context of:-
1. what they would (have) do if elected.
2. conservate principles.
3. tory economic strategy over the six / seven years

[Alan Carcas]

Oppose the 45p tax band and make all earnings below, say £10,000, tax free. Take the really low-paid out of the income tax bracket altogether. Much play was made about the rich rich paying less tax than their cleaners. After 12 years of a Labour govt. why are low-paid cleaners still paying tax. Ask Gordon!!! Much more embarrassing at PMQs that rabbitting on about Equity Life!!! That only embarrasses US, because we also did nothing about Equy Life.

Scrap ID cards, and any other totally wasteful policies.

Oppose the NIC hike. In the current climate it is totally perverse to increase the cost on employment. But only what you'd expect from an economic illiterate like Brown.

[Gurcharan Singh]

Politically, we need to shake off our image of ' party of rich'. DC has made tremendous efforts to attracting ordinary people into our party and by opposing 45% band, we will put this in jeopardy. Therefore, i suggest that we support 45% band.
Gurcharan Singh, Southall

[Raj]

If anyone knew Raj, I'm sure they'd say

And I'm sure they'd tell you after the first time you asked.

there is as much chance of getting a straight answer directly from CCHQ as there is of Brown reducing the nation's debt

Perhaps, but that doesn't change the above. You should at least try.

----

So we just reiterate we are not bound by it!

No, that's too vague - Labour will spin as saying "Tories will help their rich mates". Better to say it will be reviewed once in office or focus on something else.

[Raj]

Scrap ID cards, and any other totally wasteful policies.

So, Alan, what does that amount to and what do your proposals cost? And please don't refer me to the Taxpayers wafflebook.

[Norm Brainer]

1. Income taxes will not cut in at all until you are on a reasonable living wage,
yes.

taking into consideration your dependents.
No.

[London Tory]

We should oppose the 45p tax rate. 100% oppose it. We are the aspirational wealth creating Party, or we are nothing. £40k a year salaries in London and the South East would not buy you a potting shed.

Public spending needs to be drastically slashed. Start with the NHS, which has seen an average 7% year on year spending increase, whilst at the same time only increasing its outputs by around 1%.

The NHS has become a vast blaoted cash cow for Labour employees/voters.

[Rachel Joyce]

I think the one tax announcement in terms of income we should make is that we plan to gradually(over the course of two parliaments) raise the threshold at which people start to pay tax. We could say that all the people in the old 10p tax band will in fact after two parliaments no longer be paying tax at all.

If we combine this policy with repeating the fact that Labour are taxing the working poor at a higher rate than anyone else it will show that they are the party of unfairness, in particular reminding them of the 10p tax fiasco.

[GB£.com]

Raj,

A simple yes or no for you.

Do you know if the party you support still supports its recently announced policy of increasing public sector spending slower than Labour's plan?

[pp]

> taking into consideration your dependents.
> No.

Allowances should be tranferrable between spouses (dependants?).

Labour have attacked 'mom and pop' companies
claiming it can allow use of both partners personal allowances in a way which is 'unfair' to people on PAYE.

As usual they are completely wrong -- allowing couples to transfer allowances is not something that should be taken away from companies, it is something that should be made available to people on PAYE !

[resident leftie]

Posted by: Deborah | November 27, 2008 at 10:34

In days gone by, higher rate tax was for the real high-earners. Not any more. The band threshold has been held down so that many ordinary "hard-working families" are now paying 40%.

3.7 million people have a portion of their earnings in the 40% band, which isn't the same as them paying the 40% band across all their earnings. 31 million people pay income tax. The 45% band will kick in for 450,000-odd people on earnings above £150,000.

[ChrisD]

"This is a political trap set by Brown, let's not fall into it. The chances are that we'll inherit a wrecked economy anyway where there will have to be very large spending cuts and tax rises for everyone"

I agree with Malcolm on this issue. But I wish there had been a market somewhere that offered odds that for this reason, ConHom would go big on it!

This is a Labour policy aimed at being implemented by a Labour government after the next GE, lets not help them achieve this objective!

[Michael McGowan]

Agree with Malcolm and Graeme. Public finances will be in such a mess after the election anyway that tax rises for all are inevitable and this is just the start.

However, the 45% rate (with NI it is effectively a 46.5% rate) is likely to lead to a slow but steady exodus of highly-mobile high earners from the UK, especially given the changes to the non-dom rules. These people and their employers are increasingly conscious that they are paying more and more for less and less, as Old Labour retreats to the 1970's. Net net the 45% rate could well reduce the overall tax take. I fully expect Brown to abolish higher-rate relief for pension contributions. He is clearly targeting a hung parliament and a coalition with the Lib Dems who want a 50% top tax rate and the removal of higher-rate pension relief.

[GB£.com]

"which isn't the same as them paying the 40% band across all their earnings. "

Exactly! Which is the left's argument against a flat tax is a crude lie.

With a flat tax rate and initial tax free amount, every single taxpayer pays a rate of tax less than the flat tax rate, but the more they earn, the closer their personal % rate of tax taken approaches the flat tax rate.

So they more you earn, the higher % you pay, and the country could save millions in administration costs.

[m wood]

You are all missing the point of the PBR - the criteria for nearly every tax change was - Will this WIN OR SAVE votes for the Labour Party?
The whole focus seems to have been how can we best shore up our core vote and at the same time descredit the opposition. There is very little economic justification for any of the 'headline' decisions taken, the VAT changes are ineffective and the proposed futuretax rises will just make unemployment worse and credit more difficult to obtain.

[Graeme Archer]

The 45% band will kick in for 450,000-odd people on earnings above £150,000.
Posted by: resident leftie | November 27, 2008 at 11:26

Which is why it's so pointless! Even if we took every penny from those 450,000 people, it wouldn't begin to pay off the bottomless pit of debt we're in.

I think I'm right about pensions too. I can put as much as I like into my pension, and I get tax relief on it, from my pre-tax income. If I were one of that brave band of 450,000, I would just put as much of my income that would be taxed at 45% into a SIPP, and get 40% rebate on it.

So, the great strategy of Gordon Brown:
(*) do something ineffectual that will actually cost the Exchequer money, but which is pleasing to the amoeba-brains on his back-benches;
(*) Lie about VAT;
(*) Keep droning on about do-nothing parties, even if none actually exist.

It actually feels wrong to feel politically optimistic when the mess we're in is so awful. But I think this week was the week that Labour were officially finished; I bet it's this week we look back on in ten years' time. Brown has never managed to give a straight Budget in all his time in charge, and more, he never learns from his mistakes either. The time it takes for budget statements to unravel has decreased to practically nothing. (By the way, CCHQ's email campaign on VAT was superb - it was in my inbox well before the media had picked up on it).

[Graeme Archer]

Just read Michael's comment about the abolition of pension tax relief. I agree with you. Not enough people know that this is LibDem policy, and I can imagine it becoming Labour policy too, in just the way Michael describes. Destroying the last best hope that most of us have of not existing in penury in our retirement would be typical of Brown's attitude to pensions. I hope our frontbench ask some very direct questions about this.

[Raj]

We should oppose the 45p tax rate. 100% oppose it. We are the aspirational wealth creating Party, or we are nothing. £40k a year salaries in London and the South East would not buy you a potting shed.

Erm, LondonTory have you been paying attention? It's 45% on £150,000, not £40,000.

[resident leftie]

Posted by: Graeme Archer | November 27, 2008 at 11:38
Which is why it's so pointless! Even if we took every penny from those 450,000 people, it wouldn't begin to pay off the bottomless pit of debt we're in.

Then oppose it.

[GJTory]

Resident Leftie

My tuppence worth, in answer to your question about higher earners paying more...

1. Taxing very high earners, as you say, tends not to raise much tax revenue

2. It blunts incentives

3. In a system with a threshold below which you don't pay tax, higher earners will naturally pay more of their income in income tax than lower earners. A flat rate is therefore 'progressive'.

4. In any case point 3 is not very relevant because higher earners will pay a higher absolute amount of tax - therefore their contribution is larger. For me this satisfies 'social justice' or 'fairness' or whatever it is called these days. Even if tax above, say, £100k, were set to 1% this would be the case.

5. It is reasonable to suggest that those higher up the income scale use less govt expenditure. Therefore even at a flat rate with no tax threshold, the net contribution of higher earners will be higher - making the system progressive.

[Angelo Basu]

Even with large public spending cuts and efficiency savings taxes will probably have to rise. The 45% rate is a stalking horse for the higher increases that will in fact need to come in after the election (it has already distracted from the proposal to reduce personal allowances for those earning over £100k and remove them entirely at £150k- being cynical I suspect that it has been proposed so that if (or rather probably when) Osborne has to announce a 50p rate Labour in opposition will be able to say they would have taxed less.

It also highlights the fact that the 40% higher rate is too high and comes in at too low a salary. I can't see how it is at all justifiable to consider someone well within the income range for tax credits (and hence to some extent "poor") to be at the same time a "higher earner" who should be required to pay 40% tax.

There are not really that many votes in the constituency of those earning over £150k and I suspect that even in that group you would find opposition to paying higher taxes to be far from unanimous. It would be a mistake to pin our colours to repealing the measure without doing anything else.

Why do those on the minimum wage pay tax at all? Raise the personal allowance to the full time equivalent of a minimum wage job. Raise the higher threshold to £60k (after which tax credits are unavailable). Get rid of tax credits. Set a higher rate which in conjunction with savings on public expenditure and efficiency is overall revenue neutral. Commit to lowering that higher rate and increasing the threshold year on year as the economy picks up. This would put a substantial amount of cash back in the pockets of the bottom 90%+ of working people, provide an incentive to work and lead to higher tax only being paid by those on over £100k (the higher % rate for those on over £60k would for many be balanced out by higher allowances and basic rate being paid on a larger proportion of income) but in a much fairer and more effective way than the token vindictive measure proposed. This could be used as a stronger stimulus measure if the new higher rate was set following abolition of employers' NI up to median income - reduced costs of employment and reduced pressure for wage inflation. A good proportion of the windfall might be spent, but much may also be used to pay off personal and mortgage debt, reducing the default rates and thereby helping to increase confidence in the financial sector.

[GB£.com]

Raj, as one who badgers people for answers, any chance of a straight yes or no answer from you on my question?

Do you know if your party still plans to increase public sector spending slower than Labour, following the PBR spending revisions?

[Michael McGowan]

Graeme, Brown will not hesitate to loot the private pension system (again) if that is what is needed to bribe his core constituencies. The Lib Dems will help him do so. I see Kaletsky is spinning the line today that the UK's public sector debt is 47% of GDP and much lower than that of the US. Maybe this so-called expert can explain why the value of the pound has slumped against the dollar.

[Michael]

I think the response should be:

1. unlike labour, we are a low tax party and belive that Britain's workers are currently over-taxed.

2. However, labour has landed us with an huge debt mountain. IF we win the next election, it will take some time to A. properly assess the true scale of the debt mountain ; and B. to identify and eliminate wasteful spending.

3. Once these tasks have been achieved and borrowing is on a steady downward path, we will seek to reduce the burden of taxation for everybody.

4. we won't engage in hypothetical debates about tax rises that labour promises IF labour wins the election.

[Norm Brainer]

Why do those on the minimum wage pay tax at all?

It's all a form of control - you pay tax to remind you who is in charge, and if they can also allow you to have some back in tax credits is like receiving a monthly present from your caring parent, the government.

Why else do we need to pay tax? .. they control the money supply but then ask for some back - doesn't make sense to me.

[Michael]

I think the response should be:

1. unlike labour, we are a low tax party and belive that Britain's workers are currently over-taxed.

2. However, labour has landed us with an huge debt mountain. IF we win the next election, it will take some time to A. properly assess the true scale of the debt mountain ; and B. to identify and eliminate wasteful spending.

3. Once these tasks have been achieved and borrowing is on a steady downward path, we will seek to reduce the burden of taxation for everybody.

4. we won't engage in hypothetical debates about tax rises that labour promises IF labour wins the election.

[Michael]

not forgetting point 5:

Labour's pre-election tax commitments can't be trusted anyway. After the 2001 election, they raised national insurance having made a clear commitment not to increase income tax. Clearly there is no material difference between income tax and employee national insurance.

[Bill]

Michael

I usually always agree with you. But the pound was clearly over-valued; and as for 45% tax rate, I agree with the view that the top rate cuts in too soon thanks to Gordon's cynical failure to index rates. But I doubt if asking those on above £150K to pay 45% would be the end of the world (although one might quibble on whether 150 or 200 would be more apposite). On a wider point, from my professional experience Gordon was in many respects too kind to the "rich" for want of a better word.

[Bill]

PS

By Michael I meant Mr McGowan.

[resident leftie]

Posted by: GJTory | November 27, 2008 at 11:48
My tuppence worth, in answer to your question about higher earners paying more...

Thank you for your insight into the right-wing position.

The major complication in any tax system is so-called dependents. If it wasn't for dependents, the tax system could be greatly simplified. Some people genuinely are dependents, for example, elderly people in care homes. The term is loaded, however; for example; although a woman staying at home looking after kids might be "dependent" on her partner or the state for income, conversely, the partner, or society is "dependent" on her to raise the kids. To me, it's not dependency, it's a reciprocal arrangement. The tax system has to reflect that, and that's what WTC are for. In theory, I'd prefer negative income tax, a high tax free threshold, then a couple of tax bands above that, but I can't find an example of NIT introduced in a way where it had the possibilty of working. The minimum wage ensures that badly paying businesses are not subsidized by the tax payer.

As you might expect, I think that the more wealthy you are, the more tax you should pay as a proportion of your income. I don't agree we've come any where near the point on the Laffer curve of diminishing returns.

I would most like to see IHT increased, after a £250,000 threshold, and the whole lot spent on raising the tax-free threshold.

The way it would work is that excess money from an estate would be treated as income for the person to whom is it gifted. If you gave £1000 to 1000 people, none of whom pay tax, there would be no tax to pay. It would also reward people who work rather than the predominantly middle-aged, well-established, well-off people who benefit from their parents estates above the threshold, now that people are so long-lived.

This is the exact opposite of the Tory policy which is to subsidize the 7% of estates which incur IHT. I accept that my view on IHT is unpopular, although when combined with an income tax decrease, it might be more palatable.

[resident leftie]

Posted by: Michael | November 27, 2008 at 12:18

Labour's pre-election tax commitments can't be trusted anyway. After the 2001 election, they raised national insurance having made a clear commitment not to increase income tax. Clearly there is no material difference between income tax and employee national insurance.

They very specifically didn't promise not to increase NI. Thatcher came to power with a promise not to increase VAT. She doubled it.

[Ross]

I agree with those who say that it is a political trap and allowing Brown to portray the Conservative party as being for the rich would be fool hardy. On the other hand it is a bad tax rise.

I'd be inclined to say that the 45p tax rate would be kept until the budget is balanced again, at which point it will be reduced to 40p (or below).

[Staggering]

This is absolutely UNBELIEVABLE!! Some of you are suggesting the party supports taking away nearly half of someone's salary in tax!! Are you completely insane? It is wrong in principle - it's not surprising people have been sceptical about the Party on tax. And how can you not say anything to avoid "a trap"? It's one of the most important issues going and you're advocating silence? Can anyone recommend any decent emigration sites?

[Mrs Campbell]

It may be only 2 per cent of the tax paying population but the income tax they pay is a very much larger proportion of the annual income tax take - I believe something in excess of 10 times per head. So its not quite the same as the cleaner is it?

[Norm Brainer]

Resident leftie... the way it looks you think, and the way that I see many lefties think, is that money belongs to everyone and then it's up to government to decide how much people are allowed to keep.

The alternative is that it's the person's money by default and the government decide how much to take.

So at normal pay scales these things balance(ish) but when it comes to the high end of salaries the question is "why should the government take more of people's money? it's not fair to take it" not "why should people earning this much be allowed to keep it? it's not fair they should keep it".

The latter is obviously wrong and selfish.

[rugfish]

What happened to the rule of not binding the next parliament to decisions of the current one incidentally ?

Is that out the Labour window as well then or is everyone just happy to dawdle along with their waffle, spin and undemocratic tax and spend and store up debt plans ?

[GB£.com]

"I usually always agree with you. But the pound was clearly over-valued"

Against the Euro too? GBP was stable against the Euro for years at 1.40-ish until September last year when it completely collapsed.

[LIam Scott-Smith]

We don't actually need to choose a line on this issue at all. This is Labour trap. We by-pass the subject and concentrate on our main strand of attack which is excessive borrowing and keep hitting this government where it hurts... see press response since PBR for proof of this... the Tory line on Labour excessive borrowing is striking a chord.

[JS]

Perhaps our Treasury team should set a trap too for Labour by proposing that all pensions under (say) £40,000 per annum should be exempt from income tax for beneficiaries over the age of 70. Also that any start up business is exempt from tax for the first two years providing all profits are kept to grow that business.

[Richard]

News that the Conservative Party will not fight the next election with a pledge to reverse Labour’s new higher tax rate for those earning more than £150,000 is deeply disappointing.

Lower taxes should not be seen as a desirable extra when times are good; they are a prerequisite for a sound economy. Low taxes encourage people to work, save and invest and if you keep tax rates down the economy grows more quickly. Low taxes also reduce both the opportunity and the incentive for tax avoidance so revenues increase. If people pay less tax, and keep more of their own money, they have more incentive to work and unemployment falls as new jobs are created. Low taxes also make the UK a more attractive country for inward investment which in turn generates jobs and income. Low taxes do not just make economic sense they are a moral imperative.

High taxes only serve to penalise the successful while providing little incentive for those on less money to earn more. In the end high taxes make us all poorer, as we know, no nation ever taxed its way to prosperity.

The saying goes that nothing is certain in life apart from death and taxation; we are born free then taxed to death. If the traditional believers in lower taxation – the Conservative Party will not make the case for lower taxes then who will?

[TomTom]

I doubt it is a major issue. It may be a London issue but it is not really worth pursuing a red herring. It may well be necessary to pay for the Olympics - we don't seem to have budgeted for them and they are not far away.

If Brown thinks the Olympics require this extra levy we should ask why he did not budget for the costs.

For the Conservatives it is a non-issue when set against the overall budget balance and the economic situation.

[Richard]

News that the Conservative Party will not fight the next election with a pledge to reverse Labour’s new higher tax rate for those earning more than £150,000 (News, 25 November) is deeply disappointing.

Lower taxes should not be seen as a desirable extra when times are good; they are a prerequisite for a sound economy. Low taxes encourage people to work, save and invest and if you keep tax rates down the economy grows more quickly. Low taxes also reduce both the opportunity and the incentive for tax avoidance so revenues increase. If people pay less tax, and keep more of their own money, they have more incentive to work and unemployment falls as new jobs are created. Low taxes also make the UK a more attractive country for inward investment which in turn generates jobs and income. Low taxes do not just make economic sense they are a moral imperative.

High taxes only serve to penalise the successful while providing little incentive for those on less money to earn more. In the end high taxes make us all poorer, as we know, no nation ever taxed its way to prosperity.

The saying goes that nothing is certain in life apart from death and taxation; we are born free then taxed to death. If the traditional believers in lower taxation – the Conservative Party will not make the case for lower taxes then who will?

[resident leftie]

Posted by: Norm Brainer | November 27, 2008 at 12:43

So at normal pay scales these things balance(ish) but when it comes to the high end of salaries the question is "why should the government take more of people's money? it's not fair to take it" not "why should people earning this much be allowed to keep it? it's not fair they should keep it".

The latter is obviously wrong and selfish.

Putting aside the matter of the size of the state for the purposes of this question, the point is, how does the government raise the taxes it needs? You can choose the ammount you need to raise, but then decide how to raise it. The question for me is how does taxation affect the people from whom the taxes are taken? Who is hurt more by high taxes, who benefits more from low taxes? Is better to tax dead people on their wealth beyond a reasonable threshold, or have people on low income paying less tax? If people with large incomes pay less, then it's got to come from somewhere. Money naturally flows up in free market, and yet it's societies with a more equitable distribution of wealth who have the happiest and healthiest lives. Pay differentials will always work, regardless of how they are scaled.

[Steve Tierney]

Resident Leftie said:-
>>I am truly interested on Tory opinions on the topic of redistributive tax. I'd like to know, is it just the pragmatic argument (doesn't raise more tax) or do you believe the ideological argument that it is wrong in principle to tax wealthy people more?<<

I know its a trap Gordon is setting. I understand the reasons we should not make an announcement, just as leftie suggested Mr Cameron would. But I still don't like it.

I'm just so tired of everything having to be a "spin" which "sounds good" and is "clever strategy". I'd rather just take an ideological position, defend it intelligently, and be honest. I know, thats makes me naive. But surely if we want straight-talking politics it has to start somewhere?

So, Resident Leftie, you asked what opinions were on this. This is mine and mine alone.

My opinion is that there is no reason whatsoever that a "rich" person should have to pay a higher percentage than a "poor" person in the income tax. None whatsoever.

They already pay MUCH more tax as a physical amount through their higher earnings (that's how percentages work, after all). They pay more council tax as a result of owning a larger property. They pay more VAT as a result of spending more money on VAT goods. They pay more corporation tax as a result of owning businesses that make more money. I can see no reason why anybody should pay any different percentage of their wage.

The beauty of a percentage is that it is self-adjusting. As you earn more, you pay more. That's the balancing factor all on its own. The only thing that taking 40%, or 45%, or 50%, or 90% or any other increased burden does is make people think "If I get rich, I'll move it elsewhere."

We need to remember, Richer people employ poorer people, thus giving them the opportunity to become richer. Many people rise from poverty to relative wealth. Some fall from wealth to poverty. Its about intelligence, personality, hard work, and luck. Its not about handouts.

Leftie, if we keep treating people who are financially-successful as "cash cows" to be milked every time the government wants to open a new Quango, give away a new Tax Bribe to get reelected or Pose Inelegantly on the International Stage, those financially-successful people will go somewhere they don't get treated so miserably.

I know that the working class "warriors" of the left (many of whom have never even BEEN working class) love to paint people who have done well as "elitist", "priveliged" or "spoiled". There are probably some who are like that. But for the most part they are just honest, hard-working and decent. They don't mind paying more tax really, they know they've done well and can afford to do so. But it galls them to be constantly treated like crap. I'm not rich by any means, but I don't blame them. It would gall me too!

Equally, the *real* working classes do not WANT handouts and charity. They just want a fair deal, respect and opportunity. When you get past the indoctrinated "labour" their parents fostered them with, they are mostly Conservative at heart.

Finally, your comments about WWMTD (What Would Margaret Thatcher Do), which I suspect was made very firmly tongue-in-cheek, is in fact a great way to begin a Conservative idea. The Baroness made mistakes and did not have ALL the answers. But she was a very smart lady and so I prefer to take your comment exactly as stated and agree with it heartily.

[Adam in London]

Some people are being rather blinkered on here. Stop and think for a minute - Brown and Darling are proposing to massively increase borrowing and cut taxes with the proceeds. Is this a bad idea?

The Conservative response is 'Yes, it is a bad idea'. The reason - because it creates a mountain of debt that needs to be paid off, or at least serviced (at higher interest rates than it used to have). Our line, quite correctly, is that this debt creates a tax bombshell inside the economy, as taxes will have to rise at some point to pay off and/or service the debt. Even this is based on some very optimistic projections about economic recovery, as well as assuming some very small increases in overall government spending (necessarily implying cuts in quite a few places). If the recession is deeper or longer than the government expects the debt will be even more gargantuan.

Therefore, if our argument is that Labour's plans mean a mountain of debt that needs to be paid for with tax increases even if they manage to achieve a full economic recovery in under 2 years and start to shrink the public sector relative to the private sector (share the proceeds of growth ideas), then I don't see how we can realistically argue that if we came to power suddenly those tax increases wouldn't be needed. Either the debt creates a tax bombshell or it doesn't.

[KSA]

all income tax should be at a flat rate.
As it is a percentage of income that would be fair as those who have more would still pay more. I am not on a high income but do not see why those who are should pay at a higher rate.
Cut vat on everyday items and increase it on luxury items, including confectionery, drink and tobacco. The rich buy more luxury goods and, therefore, would pay more tax that way.

[ToryWarren]

I will fall into this category and as a matter of principal I will not pay for Broooon's mess. I will move abroad, there are plenty of opportunities to do what I do in South Africa or Australia or US.

[Norm Brainer]

how does the government raise the taxes it needs?

It can print money to a certain value to keep inflation where it wants it. :)

You can choose the ammount you need to raise, but then decide how to raise it.

You see how much is available then choose how you can spend it.
(Of course there are some things that need to be done so you would have to decide how to raise it like you say)

[RichardJ]

Say nothing and just don't introduce it when we win.

Or, if Cameron and co have some guts, savage the idea of a 45p rate and explain why it's wrong.

[GB£.com]

So the official Tory policy on this is going to be too keep schtum, as you daren't argue for what you believe in any more?

That's pretty spineless, isn't it?

Obama won by inspiring people to vote for him.

The Tories seem to just want to hide in the shadows and hope enough people stop voting for Brown.

[Angelo Basu]

"Cut vat on everyday items and increase it on luxury items, including confectionery, drink and tobacco. The rich buy more luxury goods and, therefore, would pay more tax that way."

The rich spend more on booze, fags and sweeties for the kiddiewinks than poor people? Are you sure about that? You don't think that this (like the Chancellor's underreported hike in excise duties to balance out the VAT cut) would actually involve a proportionate increase in the level of tax paid by poorer people? By all means use your argument to put 50% VAT on yachts and cars with engines over 3 litres, these are bought more by the rich than the poor. But, booze, fags and sweets?

[Victor, NW Kent]

Absolutely no need to take any stance at all on it at this time. If Labour is still in power at that time [ouch] then a decision can be made. If they are ousted then their decisions go with them.
If the Conservatives achieve power at the next general election they need to see how bare the nation's coffers are and the true size of our debts. At that time a great many decisions will be needed and made based on facts.
Those facts are not available now and so neither opposition nor support is required. Either would be foolish.

[resident leftie]

Posted by: Steve Tierney | November 27, 2008 at 13:45

So, Resident Leftie, you asked what opinions were on this. This is mine and mine alone.

Thank you very much for your well thought out opinions. I recommend http://www.margaretthatcher.org as an excellent WWMTD archive.

[GB£.com]

Well Gids is on QT in Basildon tonight Victor.

What happens if he is asked directly about the 45p rate or the plans to growth public sector spending more slowly?

Faint? Feign death? Become mute?

[CJT]

Oppose the 45% tax band, scrap tax credits, raise personal allowances to £12000, thus taking the low paid out of income tax altogether. Oh, and shrink the State by implementing the savings identified under Michael Howard for a start. Answer the question 'do we need all these equality and diversity outreach workers?' in the negative and act accordingly.

How's that to be going on with?

[JS]

[email protected] is right. It should be remembered that people will spend their own money far more wisely than if the State takes it and wastes it for them. Implement immediately the savings already identified and then identify a hell of a lot more.

[Steve Tierney]

CJT: >>How's that to be going on with?<<

Excellent. Particularly the personal allowances raise. Everybody benefits the same (fair), but the poor feel it much more directly by being taken out of tax altogether (honourable). Its win-win, in my opinion.

[phil scott]

This measure should be opposed.

Are we a party of low taxation or are we not? Everyone knows that it will not bring in the revenue predicted, as, let's face it, in this day and age high earners can just go elsewhere if the fiscal environment here is not good for their wealth.

In any case, if you also take into account the fact that personal allowances are being withdrawn gradually for those earning more than £100k (and altogether for those earning more than £150k) then this means that those who qualify for the 45% rate will actually end up paying an effective rate of about 50%, which is very counter-productive.

I fear another brain drain: will the last person out of Britain please turn off the lights!

[pp]

Would any one like to put a figure on 'low tax' and 'high tax' ?

As I see it tax is (or should be) purely the way government finances its spending - if it spends a lot it has to raise a lot; if it only spends a little then it only needs to raise a little.

There seems little point in arguing that a government should raise more than it needs, or less than it needs - it needs to raise the right amount and this amount is defined by its spending.

The only question is how this amount is raised - particulalry how the burden is spread.

Arguing over one particular band of income tax seems to be missing the point (anyway aren't the 45%ers going to lose their personal allowances too?).

In reality it was introduced to distance brown from the decade long commitment not to increase income tax (everyone will be next...); to 'bash' the rich (to cheer up those in cheap seats) and to distract the tories from the real issues.

It is the spending that is creating the bombshell - once the bombshell exists, the government (who ever they are) will have to deal with it.

To be honest, a few percent on (or off) VAT (that this is supposed to pay for) is neither here nor there - what I really care about is the government borrowing when it is not needed, and then having to waste more of my money servicing the debt that should never have existed.

[Malcolm Dunn]

Keep up Chad.He'll say what he's already said, reversing it is not a priority for an incoming Conservative government. In my opinion that is exactly the right thing to do. In the event that we inherit an economy where any tax cuts are possible those at the bottom should be a priority and taking people out of the tax system on very modest incomes altogether would be the right thing to do.
Do you really believe in half the stuff you post or are you just doing it to cause trouble?

[Norm Brainer]

There seems little point in arguing that a government should raise more than it needs, or less than it needs - it needs to raise the right amount and this amount is defined by its spending.

A government always "needs" more money... they'll always find a way to spend it.

So it's defined by a balance between its spending needs and the income it is reasonably possible to raise.

..but it's open to argument where the tipping point is.

[GB£.com]

No just seeking clarification Malc. Thanks for the update.

And as no-one else seems as informed as you, what has Mr O said about the 'growing public sector spending slower than Labour' since the new PBR reduced spending figures were released?

[GB£.com]

Malcolm please bear in mind that the thread at the top of the page starts by saying that the clearest statement has come from Hammond, not Osborne, then asks what the Tory position should be.

If it is already as clear as you say, are ConHome being a little naughty?