Darling may be about to set second supertax trap for Tories

Jonathan Oliver and David Smith report that Alistair Darling may use this week's Budget to beef up the planned supertax on higher earners:

"Last year the Chancellor announced the introduction in 2011 of a 45% top rate of income tax for people earning more than £150,000. Darling has come under pressure from Labour colleagues to reduce this new top-rate threshold to £100,000 – a move that would lead to higher tax bills for 500,000 high earners."

Opponents of George Osborne's acquiescence on the current 45p plan feared that this would happen.  We shall know more on Wednesday.

Last year's surge in the polls towards the Tories followed Darling's Budget of green tax rises.  If the advance speculation is right and Darling plans to 'greenwash' tax rises we might see a hardening of this weekend's large Tory leads.

Interviewed on Andrew Marr's Sunday show earlier today Mr Osborne said that it wasn't sensible for him to set out his plans to close Labour's economic hole until the true size of the hole was clearer.  A year ago he was being asked to fill a £40bn deficit, he said.  More recently the talk was of a £110bn deficit.  Now there's even the possibility that the deficit will be £180bn.  The Shadow Chancellor said one thing is absolutely true: If spending cuts are necessary they will be "Labour cuts" and if tax rises are necessary they will be "Labour tax rises" - all necessary to deal with "Labour's budget deficit".  

During the interview he declined to toughen his rhetoric on public spending.  Talking of "restraint" rather than reductions.

Writing in The Sunday Times Mr Osborne did use a very good turn of phrase to explain why taxes should be a last resort for dealing with the debt crisis: "We should not be overtaxed because Labour has overspent."  ConHome - with our new Star Chamber - has today launched a search for spending cuts.

Tim Montgomerie

> Iain Dale thought George Osborne's Sunday AM interview was "probably his best ever interview".  Iain focuses on the revelation that Gordon Brown did not write one of his letters of regret to George Osborne's wife, Frances.  Mrs Osborne being a victim of McBride's smear operation.

Comments

[John Prendergast]

I do agree, George Osborne was at his best on this Andrew Marr show. He posed just the right balance between keeping the sharp end of services and scope for cost reduction. The devil lies in the detail but GO wisely said he would need to see the books before going too definite. At the same time he was much less vague than heretofore

[Anon]

Ironic. How many quango-crats with jobs created under Labour earn that amount?

[Adam-]

Most Tory voters have done pretty well for themselves but do not, however, earn that much. Large numbers of Labour's new QUANGO client state, however, do. Can't the Tories foster a humiliating blacklash amongst that demographic?

[Steve Green (Daily Referendum)]

Labour have failed in their year long attack on George Osborne. You can bet that they are now very worried about budget day. George Osborne is going to tear both Darling and Brown new ones. Watch the polls rise after Osborne responds to the budget.

[Matthew Reynolds]

Quite frankly this 45% band will only damage economic recovery by driving the rich , prosperity & jobs to lower tax environments. Tax avoidance will rise as thanks to accountants the wealthy will declare loads of their money as capital gains rather than income meaning that rather than paying 45p tax they pay 18p instead ( that is at a rate 60% less than Brown & Darling would like and which is 10% less than the 20p basic rate of tax paid by most people - hardly fairer taxation is it ?).

Whenever the Thatcher government cut top rates of tax dodging became less of a problem.

Quite frankly I would ax Capital Gains Tax , tax capital gains as income for the first five years and gains secured over five years after an initial investment would be 100% tax free. That would stimulate the long term investment needed for lasting prosperity while simplifying taxation & closing an unfair loophole.

Top rates of income tax should be cut to one 30% rate on the first £250,000 p/a of taxable income with claw-back thresholds for basic personal allowance & pensioner tax allowances also at £250,000 p/a.

That would reserve higher taxes for those who can afford them while giving the UK the kind of enterprise friendly tax system needed to foster an economic upswing. The Lawson Budget of 1988 ensured that the recession of the early 1990's ended quicker as Britain was tax competitive.

Also by doing what I suggest Labour could not accuse the Tories should they raise the basic personal tax allowance and/or pensioner tax allowance of supplying a ' tax cut for the rich' as claw back thresholds would restrict the benefit of such tax cuts to those who need them more than high earners.

Just assessing the revenue loss caused initially by these tax cuts & then cutting the same sum off of QUANGO's , consultancy budgets , civil service numbers etc would move money away from the Client State that is a drag on growth to the private sector whose success is vital for future economic dynamism.

[Tom H]

A pity that George Osborne saw fit to overlook Labour's overspending.

[Pink Tory]

Our surrender on 45p was sure to invite more of the same from NuLab. The only certain result is that the Left win a little more of the ideological territory on the size of the state.

[Steve Green (Daily Referendum)]

Tom H, you are Kevin Maguire and I claim my £5. You are fighting the truth with lies, it only works for so long.

[Gary]

George Osborne is the hardest worker in shadow cabinet. This mornings interview with Marr was his best. He wants power and for that reason will be prepared for any Brown/Darling trap.

[Aless Bieri]

Our responce should be simple.

In the PBR the chancellor announced his 45% band, then immediately lowered the threshold for paying it. It doesn't take a genius to see that he will not stop at £100,000 if he can get away with it, he'd move that down to £80,000 or even £50,000 given half a chance.

With no spending cuts on the horizon from Labour it's inevitable that tax is going to have to go up and up under their regime, and the tiny 60% bands that the PBR introduced where only the tip of the iceberg.

[Tom H]

Steve: Osborne's criticisms of Labour's overspending would have been all the more powerful if he hadn't pledged in 2007 that a Conservative government would match Labour's [over]spending totals until 2010-11. This pledge came in spite of the many years of overspending by the government.

[David_at_Home]

Actually, I think hardy anyone is worth more than about £100K pa.

Yes, those enterprising individuals who start their own companies and create wealth where there was none before are truly invaluable but such people are generally rewarded by the increasing capital value of their companies and by their own internal sense of achievement. But hired executives are rarely that valuable and there are invariably several people working immediately beneath them, in the same organisation, who are just as good as they are, or maybe better. Success, when it comes, is due to teamwork and the graveyards are full irreplaceable people.

So a large part of me does not care if those earning more than £100K are taxed more heavily. There is, however, another part of me which realises that the rich are expert at evading taxes (or hiring people to do this for them) so increasing the rate of income tax for such people would, almost certainly, be counter productive. Hence my pragmatic support for the UKIP policy of a flat tax combined with generous personal allowances (which help the poor). This could be combined with a policy of closing loopholes (Non-Doms etc) and, perhaps, a property and land tax to ensure the wealthy pay their share.

[Raj]

I would refuse to play Labour's game and say that the Tories won't reverse these tax rises until it becomes affordable to do so. Then see how far Labour will go because £100,000 is a psychological barrier - go under that and ordinary people will think they're next.

[pp]

We should kill the 'green tax' idea entirely.

Taxes are to raise revenue to pay for essential government responsibilities; they are not to modify behaviour.

The law exists to define what people can and cannot do.

If 'quotas' are to be assigned to anti-green activities they should never belong to private companies, they should be assigned equally to individual citizens, which they can then delegate to suppliers as they see fit - either for their own use/benefit, or (maybe for a fee) for the use/benefit of others.

[niconoclast]

The rapacious tax collector should be resisted like any other commom criminal attempting a mugging on the street.We have two choices.The Tory mugger will demand a litttle less than the Labour one.There is a third way and that involves resisting the organised crime of Labour and Tory taxation and opting for Capitalism instead.

[True Bred Pomponian]

G.O., don't worry about taxes in your response, ask them why they have failed to cut public spending.

[Victor, NW Kent]

I just hope that Osborne has a long meeting with Redwood and Fallon before the budget debate. We know from past experience that Darling will try to hide several of the real implications from view [he has no choice] and the Tories must not be caught with their pants down as they did when Brown made his infamous 10P announcement. The absurdity of that policy did not dawn on them for a year. Nor did it strike Vince Cable.

Someone must be there to do the maths even if it is an aide who messages Osborne's Blackberry.

[Ross Warren]

Taxation is a form of dependence and its a very big drain on us all. Saying that we all know that we have little choice if we want everything else we are dependant on that can only be provided by somebody else.
The alternative is we pay no tax at all and each buy all of the services we need. For now and at least until we are out of debt tax's are set to rise. We have little choice in that. Brown has added a few years to our burden. However there has to be a better way than taxes so high they snuff the life out of the economy. There is of course an answer and its the foundation of the next boom. We must encourage far more of our people to take up their bed and engage in the market for themselves. We need to undo decades of bad training, a school system good at instilling dependence has to become one that encourages people to work towards setup of their own business's. We should reform Welfare by allowing those people the freedom to buy and sell (within the benefit rules set) and support them whilst they build up their small business. We should encourage the disabled especially to trade in some way.
If they are successful they will be free of their dependence on the state, if they do not succeed to that extent they will still often save valuable money that the Nation can use elsewhere. Indeed we could invest some time in training these people in the how's of online trading. Those who can trade should. Unemployment should not be an excuse for doing nothing to help yourself. Of course they will be doing some work and that will have to be stated and reported to the Welfare agency. They may still be expected to seek well paid work if they are able. A very modest amount of stock is a good start.
There are so many ways we could encourage enterprise whilst simultaneously ending the black economy. Encourage them to Trade and make them account for it.

[niconoclast]

The Tories should carry the Thatcher torch forward by proposing wholesale privatisation of the Welfare State.We have private life insurance,car insurance etc so it ain't rocket science.The only proper role for the State is defence, police and the courts.The Cameron political cross dressing transvestism is obscene.

[Cleethorpes Rock]

Simple answer:

"We won't make any decisions on spending and taxes until we've seen the books on day one of a new adminsitration. What is clear is that Labour have got us into so much debt that we're going to have to make some tough choices about how to pay it off."

As for the specifics of widening the tax drag-net, we need to ask:

- How much do you think the tax rises will generate?

- What were the results of your impact assessment on the negative effects of taxing higher-earners?

- Is the measure temporary or permanent?

- You've already brought down the supertax threshold so can you assure people it won't be dropped further to bring more people into the supertax?

I expect the measure will do more harm than good and has more to do with making the public think "someone else" will end up paying the bills and not them.

[David]

"The only proper role for the State is defence, police and the courts."

What are you, a socialist? These should be privatised too; there is no reason the state should control them, just as there is no reason for health, education and the like.

[Peter Buss]

I don't think the 45p is that big a deal frankly but do think the increase in NI is scandalous as it is a direct disincentive to hiring people. Politically it makes no sense to go bersek about the 45p.
Also it makes no moral sense at all to on the one hand say how on earth can high earners be insentivised to work if they pay this extra tax and yet talk oh so glibly about getting rid of the the WORKING family tax credit system.The poorer people need incentives as well and as they are part of our Nation, then this One nation Tory at least thinks we should have their interests at heart as well.

[Ross Warren]

"The only proper role for the State is defence, police and the courts."

What are you, a socialist? These should be privatised too; there is no reason the state should control them, just as there is no reason for health, education and the like."

I glad to see I am not the person who is willing to think the unthinkable. I see one very big drain on the state that could be transferred to private ownership and that is the prison service. Of course the state will still have to stump up some cash to pay for the courts use of the private service, but it should be very possible to shave a vast amount off the bill that we the tax payer have to pay for each and every offender.

[Ross Warren]

"The poorer people need incentives as well and as they are part of our Nation, then this One nation Tory at least thinks we should have their interests at heart as well"

End the 2 class system of taxation, by getting rid of PAYE. That way all can benefit from the (then rapidly shrinking)Tax loopholes. I can see it now, McDonald's staff taking their salary as a capital gain.

[Angelo Basu]

"Quite frankly this 45% band will only damage economic recovery by driving the rich , prosperity & jobs to lower tax environments."

Which groups of people get salaries/bonuses which total over £150k? How many of these are mobile and could/would move away if they were taxed more?

Even if the threshold moved to £100k the mobile part of the constituency is relatively small (you are getting into middle-ranking City lawyers and accountants, but they could already have earned more in NY etc pre-crash and didn't leave in droves, indeed we imported massive numbers from SA, Oz and NZ). The "wealth creators" amongst them are a tiny minority if noticeable at all - in present circumstances without vilifying them I think we should be able to agree that bankers and brokers quite possibly didn't merit quite the salaries and bonuses they were getting. The entrepreneurs and innovators running their own businesses will typically not be that bothered about taking a juicy salary because they will be focusing on building the value of their businesses and taking their returns from the business profits.

I have no problem in hitting that level of earners a little harder if it is used to reduce the burdens on the vast bulk of hard-working people in the country.

It might lead to the overall tax take going down, but cutting spending is a better way to respond to that.