Thursday 15 March 2012

Warning to Danny Alexander - Stop George on cutting 50p rate! least without adequate help for the lowest earners.

When the Lib Dems took on the Chief Secretary of the Treasury role in the coalition we knew that when it came to budgets we would have someone at the very heart of making sure that the taxes and benefits would maintain a Liberal Democrat fairness.

Rumours have been circulating for a while and coming to a height today that George Osborne is considering dropping the 50p tax rate next week in the budget. If that is true what on earth has happened to we are all in this together? What will have happened to helping those that are most in need?

I do not see a way that George can simultaneously take 10% off the top rate of tax while at the same time lifting the threshold to £10,000 or even to my dream of the level of the National Minimum wage. There is no way that can be done unless say you sell off the NHS or some other major unit of Government expenditure.

If Nick Clegg thought there was a falling out over tuition fees, or last weekend over the NHS, he will have seen nothing compared to outpouring of condemnation from the party if the top rate is cut while those on minimum wage are still paying tax, having harsher restrictions on their benefits and cuts in tax credits. We have seen a number of people leave the party in recent days, if that scenario happens I'm not sure I as a membership officer can prevent even more dissatisfaction.

There is nothing worse than the membership officer opening his inbox and seeing someone giving a long or short list of reasons for which they no long feel this party fits their beliefs only to look at parts of the preamble to our constitution shining through in the things that they still believe in.

That is why I want to turn to two key, interlinked sentences from that preamble ahead of next weeks budget:

"We will foster a strong and sustainable economy which encourages the necessary wealth creating processes, develops and uses the skills of the people and works to the benefit of all, with a just distribution of the rewards of success."


"We recognise that the independence of individuals is safeguarded by their personal ownership of property, but that the market alone does not distribute wealth or income fairly."

Therefore we need to get that balance right, a just distribution at the bottom end, should not be at the expense of a decrease on the marginal rate for the top amount of top earners. Also we need to be aware that for years now the market has not been distributing wealth fairly and many have not had a pay rise at the bottom end while many, especially in retail but also elsewhere, are living in almost daily fear of losing their cups altogether.

There are ways to give wealth creators a tax break while still stimulating growth better that cutting the top rate. A cut in corporation tax. A 0% rate employers contribution on new employees for first 12 months of employment etc. These are tax breaks for wealth creators that only happen when they create wealth and jobs for others.

Danny you cannot be the champion of the world, but at least keep being the champion of the low paid in this time of austerity. If you don't who knows where that will leave the party.


  1. It looks like a drop by 5% in the top rate is most likely, in exchange for a minimum tax contribution. Which makes sense to me: Tories hate taxations on wealth, but don't lose much ideological front by admitting the wealthy ought to pay at least some tax.

    The rich dodge the 45% rate or more abroad, anyway. A 5% cut might be enough to entice some back on shore, but if it isn't the minimum tax rate will at at least cover it, which would be no change at all: the potential negative is largely neutural.

  2. Sorry, I meant that they dodge the 50% rate. I expect many will dodge the 45% rate, too, but their accountants won't be able to do much to get around a minimum contribution.