The 50p Conundrum

‘Hands up in the cabinet if you’re going to benefit from this tax cut?’

Certainly Ed Miliband’s response to Osborne’s budget last Wednesday was one of his finest parliamentary performances as leader of the Labour party. However, I cannot help but question the wisdom of targeting this budget as the ‘millionaires budget’. 

Before the last election the Labour government introduced the 50p top rate of tax, laying a trap for Osborne and Cameron; would the Old Etonians pledge to cut tax for the richest and risk looking out of touch? They didn’t take the bait and the 50p rate was accepted by all as a necessity in the age of austerity; now it is Osborne’s turn to lay a trap for the Labour party. Strategically this a clever political move by the Chancellor. He’s given the 50p rate two years, proving some timid commitment to ‘we’re all in together’, and allowing the semblance of enough time passing to prove it’s counter-productiveness. Scrapping the top-rate of tax in the 2010 budget would have been rash. two years into government looks considered. 

So why can’t the Labour leadership accuse the government of cutting taxes for millionaires? The simple fact is that this is only a workable strategy if they are going to pledge to reintroduce the 50p rate. If they are not planning on reintroducing the 50p rate they heading down a political dead-end by spinning a narrative of ‘tax cuts for millionaires’ which they, for all intents and purposes, will not reverse. If this is the case, then the 50p rate is neutralised as an issue in the next election. The Labour leadership need to make their mind up if they are going to accept the new 45p rate or raise it back to 50p because it is integral to their response to this budget, now and in the longer term.

Clever Osborne.