Budget 2015 was yet another let-down for fiscal conservatives and opponents of big government, not that this beleaguered group have come to expect any better after five years of Conservative-LibDem coalition rule.
The fact that the Tories are actually happy that the media is reporting that government will “only” shrink back to 2000-era levels (when New Labour ruled the roost) is definitive proof that Britain is not still in thrall to Thatcherism and pro-market conservatism, as some left wing commentators suggest, but rather is clinging petulantly and fearfully to Gordon Brown-style Big Government largesse.
When in government, Conservatives have to deal with a public that is used to big government, collectivism and intrusive state involvement in almost every aspects of their lives. Britain never had the pioneering, fiercely independent spirit that characterises America, and the modern institutions that emerged from the post-war consensus (the welfare state and National Health Service) only shifted our political centre of gravity further to the left.
Setting out his plans in the Commons, Mr Osborne said: “We took difficult decisions in the teeth of opposition and it worked. Britain is walking tall again.
“Five years ago, our economy had suffered a collapse greater than almost any country.
“Today, I can confirm: in the last year we have grown faster than any other major advanced economy in the world.”
He said he would use a boost in the public finances caused by lower inflation and welfare payments to pay off some of the national debt and end the squeeze on public spending a year earlier than planned.
In 2019/20 spending will grow in line with the growth of the economy – bringing state spending as a share of national income to the same level as in 2000, the chancellor told MPs.
The BBC’s Robert Peston said this was a move aimed at neutralising Labour’s claim that the Conservatives would cut spending to 1930s levels.
But nothing did as much to condemn the Conservative Party’s half-hearted attempt to restore fiscal discipline to Britain over the past five years as Telegraph columnist Dan Hodges’ verdict on Budget 2015, the budget that “killed Labour”:
As more people come out in support of scrapping the 40% tax band – or doing something, anything that might alleviate the pinch on middle income earners – David Cameron remains resolutely set against the idea.
This time, it was the turn of one of Cameron’s own No. 10 Policy Board members, Nadhim Zahawi, to advocate for 800,000 people caught up in the fiscal drag which has seen them start paying the 40% rate on their marginal income in the last three years.
Mr Zahawi on Wednesday praised plans by Renewal, a Tory pressure group, to abolish the 40p rate entirely and deliver a tax cut worth £2,000-a-year for 2 million middle class workers.
Under the proposals, the move would be funded by lowering threshold for the 45p rate from £150,000 to £62,000.
In a speech at Policy Exchange, a think-tank with links to the Conservative Party, Mr Zahawi said: “It is a welcome development that Conservatives have started to seriously debate where next for income tax.
“Labour have the 50p, the Lib Dems have the mansion tax, we need our own iconic tax policy. I think Dave Skelton’s [from Renewal’s] contribution, and his suggestion that we abolish the 40p rate and pay for it by lowering the 45p rate was a great way of starting the conversation.”
Renewal’s plan is not perfect – £62,000 seems far too low to impose what is a very high top marginal rate of 45%, for instance. Nor is the idea of making an ‘iconic’ tax proposal just to have a handy catchphrase with which to compete with Labour and the Liberal Democrats redolent of good policymaking or government.
But this is a problem that affects people up and down the income scale, and the idea of giving some relief to those slightly higher up the scale deserved more than the immediate dismissal that it received from David Cameron. As the Telegraph continues:
Mr Cameron on Wednesday defended the government’s focus on increasing the tax free threshold.
Asked if Tory back-benchers were right to call for the 40p threshold to be raised, Mr Cameron said: “I’m a tax cutting conservative. I want to see us relieve people’s tax burden. We’ve chosen to do that through raising the personal allowance which helps everyone earning under £100,000.”
David Cameron, the tax cutting conservative. It sounds good, but it is hardly an accurate claim.
When Cameron says that “we’ve chosen” to raise the personal allowance, he neglects to admit that this was a Liberal Democrat, not a Conservative policy. Had the LibDems not manoeuvred their way into coalition government, the Conservatives would likely never have entertained the idea of a personal allowance up to or exceeding £10,000. Now that he is also rejecting the idea of doing anything at all about the 40% tax band – either scrapping it or increasing the level at which it applies – he is committed to doing nothing significant for middle income earners either.
This leaves only those who earn enough to qualify for Gordon Brown’s new top rate of income tax, which George Osborne reduced from 50% to 45%. And that is the situation currently faced by the Conservative Party – the only concrete actions of this ‘tax cutting conservative’ party have been to cut the taxes for the very highest earners. This track record is every bit as bad as the optics make it seem.
Ed Miliband and the Labour Party like to talk about the “cost of living crisis”, and they are right to do so. Aside from the fact that there is obvious electoral mileage to be gained, someone needs to talk about the fact that despite the better economic news of late, wages remain stagnant while inflation continues to eat away at purchasing power. Economic growth means absolutely nothing to people if it is not reflected in their own personal circumstances.
At some point soon, people might start realising that another UK economic recovery built on booming property prices alone is unsustainable and undesirable. And when this happens, the focus will turn to consumer spending, and why it isn’t more buoyant.
Perhaps then the foolishness of treating ever more British wage earners as higher rate taxpayers will become more readily apparent.
Well, now we have it conclusively. It has nothing to do with making the rich in our society pay their “fair share”, no matter how loosely you define (or indeed blatantly misuse) the word “fair”. Nothing to do with ensuring that essential public services are funded, either. No, Ed Ball’s announcement of the Labour Party’s intention to reinstate their punitive 50% top marginal rate of income tax has everything to do with punishing people for daring to still be rich, for having the temerity to succeed.
Daniel Hannan MEP, writing in the Telegraph, ponders the cognitive dissonance behind a proposal to raise taxes without realistic hope of increasing revenues, and wonders if Labour are right to stake their electoral hopes on the British people being motivated primarily by envy and a desire for vengeance:
Labour doesn’t actually think the 50p tax rate will make Britain more prosperous. We know this because, for all but the last few weeks of its 13 years in office, it kept the top rate at 40p. Yet it now brazenly calls a 45p rate “writing a cheque to millionaires”. On one level, this is too silly for words: even if everyone earning £150,000 were a millionaire, on no conceivable definition does demanding less money from someone constitute “writing a cheque”. But Ed Balls has presumably calculated, as Iain Martin adroitly observes, that there are enough votes in envy to cobble together a majority under the uneven constituency boundaries.
In another column he also reflects on the results of a YouGov poll showing that an overwhelming majority of Labour supporters believe that a 50p tax band should be brought back even if it was conclusively demonstrated that doing so raised no additional revenues. The telling visual is here:
Hannan goes on in this second piece to explain the motivations that may cause people to vote as they did in the poll, and has the humility to accept that he (and others on the opposing side of the argument, myself included) probably suffer from similar confirmation biases and reverse rationalisation on this and other matters.
But the inescapable fact is that the motivation for supporting a revenue-neutral or revenue-negative tax increase comes largely down to envy, and that ugly part in the minds of some in the Labour Party (fully accepting that the Conservative Party has other ugly parts of its own) that would rather everyone in the country be worse off and more equal than better off and more unequal:
Envy is an ugly and debilitating condition, but it seems to have an evolutionary-biological basis. The dosage varies enormously from individual to individual, but even toddlers often display a sense that, if they can’t have something, no one else should either. If they had the vocabulary, they would doubtless, like the 69 per cent of Labour supporters, explain that emotion “on moral grounds”. Few toddlers, and few Labour voters, openly admit to being actuated by vindictiveness.
Most policy positions are an expression of some ingrained tendency. For example, we have an instinct to care for the vulnerable, and also an instinct to value reciprocity, and our welfare system results from an interplay between the two. Similarly, the current row about deporting foreign criminals has less to do with their numbers or the nature of their crimes than with our instinct – again, a human universal – about hospitality and its abuse. We shouldn’t be surprised when people who suffer from envy elevate it into a political precept and call it “fairness”.
The concept of fairness has been much abused by politicians (generally those on the left of the political spectrum), particularly since the start of the Great Recession. The worthy desire of Labour politicians to ease the crippling, painful effects of poverty on those less fortunate in our society is not in question, but it is disconcerting when they cling to the idea that punitively high, revenue-neutral tax increases will do anything at all to help the poor other than to cheer them up with the knowledge that wealthy people are also feeling the pinch.
And while we are quibbling about wording, Ed Balls needs to be taken to task in the media for characterising George Osborne’s decision to reverse half of Gordon Brown’s 50p tax hike to a slightly more palatable 45% top rate as a “massive tax cut”. If a five-point reduction in tax rates constitutes a massive tax cut, surely the ten-point increase in income tax instituted in the dying days of the Labour government of which he was a part could only be described, using the same dramatic language, as a gargantuan, devastating, apocalyptic tax increase? And yet, come general election season 2015, it is certain that we will not see Ed Miliband or Ed Balls’ faces smiling down at us from billboards promising “massive tax increases”.
But let us return once more to the YouGov poll results. No other mainstream British political party – not even the Liberal Democrats or the supposedly crazy UKIP – has a majority of their supporters who believe in raising taxes for the rich just to teach them the lesson that hard work does not and should not pay. That distinction is reserved for the Labour Party, a party whose leadership and supporters are now – quite cheerfully, openly and stridently – acting in a dangerously irrational way.
Irrational, that is, if we take them at their word that they have the best interests of all the British people at heart.
Maybe a 65% top marginal rate of income tax would make us even more popular.
Dan Hodges may have resigned his Labour Party membership last year in protest of the parliamentary party’s opportunistic stance on intervention in Syria, but he still strongly identifies with Labour values – indeed, his Telegraph biography states that he “writes about Labour with tribal loyalty and without reservation”. One would expect no less from the son of my firebreathing local MP, Glenda Jackson. Which makes his scorn for the current Labour leadership and pessimism for their prospects in the 2015 general election all the more compelling.
Of course, one might say that it is perfectly natural for someone who has publicly fallen out with the party hierarchy to publicly root for their demise, and that it is unseemly to trumpet the latest poll results showing Labour’s lead over the Conservative Party almost completely extinguished. But Dan Hodges comes packing precedents, facts and statistics.
First come the simple, time-tested truths:
The party that is seen as being best placed to run the economic affairs of the nation normally wins the election. And at the moment that party is seen to be the Conservative Party. In fact, that party has been seen to be the Conservative Party ever since Labour was ejected from office in 2010. Through rain, through shine, through double-dip (erroneously reported double-dip if you prefer), and through recovery, the Tories have enjoyed a comfortable lead on the economy. The perception that David Cameron and George Osborne are the guys to run the nation’s finances is baked in.
Another issue is leadership. The man who people see as the best suited to be prime minister is usually the one they select as their prime minister. In this case that man is Cameron. From the day Miliband was elected Labour party leader, people have looked at him, and then they’ve looked at Cameron, and they’ve said “David Cameron is the one best suited to running the country”. There has never been a single day when they’ve said “Actually, I think that Ed Miliband is best suited to running the country”. Again, the Tory advantage on leadership is baked in.
Strikes one and two. On economic stewardship, for better or worse, the question is quite settled. George Osborne, for all the many things he has done wrong and key conservative principles on which he has compromised (partly through necessity of coalition and partly through want of a backbone), has still managed to deliver the strongest rate of economic growth since 2007. Meanwhile, Shadow Chancellor Ed Balls’ continued shrieking about economic flatlining and living standards (always a lagging indicator) are increasingly coming to sound churlish and divorced from reality.
Hodges also considers the trove of other indicators that are trending in favour of the government at present:
If you think abut it, it’s fairly logical. “So, Bill, I see the economy is growing faster than any of our EU rivals, unemployment is falling, crime is falling, that wave of east European migration didn’t materialise after all, business optimism has returned, wages are rising again, inflation is still low, interest rates are still low, and this lot seem the ones best placed to help the family finances. What are you going to do in the election on Thursday?” “You have to ask? I’m going to kick the bums out.”
The crux of the matter, according to Hodges, is that in order for Labour to win, the British electorate would have to simultaneously break almost all of their recent behavioural precedents and behave in a most unpredictable way, namely:
An opposition party could retain its midterm vote share. A party in power could be ejected after just one term. Even though the economy is improving and unemployment is falling and crime is falling and business optimism is increasing and interest rates are historically low and inflation is historically low and wages are rising in real terms, people could say “It’s time for a change.”
Well, when you put it like that…
It did not have to be this way. As any reader of this blog will know, I am no supporter of the Labour Party, and given the fact that the Conservative-led coalition government is at least making timid steps to roll back the size of the state and tackle government spending, I have no great desire to see things change in this regard. But I also saw a path that Labour could have taken to put themselves in a better position going into the 2015 general election, a path that they conspicuously chose not to take.
This route to potential victory involved making an initial very public mea culpa accepting responsibility for their previous economic mismanagement and unsustainable growth of government (and so drawing a line under it) and a pledge to take deficit reduction at least as seriously as the Tories, followed by a pivot to actually address some of the British public’s legitimate concerns on welfare, on Europe and on government spending. From his recent columns, it is evident that Dan Hodges also saw this potential door back into power, just as it was firmly being pushed shut by Ed Miliband and Ed Balls.
The Labour Party leadership and allied local party activists who have drunk merrily from the Ed Miliband Kool-Aid since 2010 probably do not like to hear any of this, from someone they no doubt consider a turncoat. But I have a strong premonition that, should the 2015 general election not go Labour’s way, it is the words of Dan Hodges that people will summarise and plagiarise when writing their post-mortems of the Ed Miliband era.
Maybe Dan Hodges isn’t Labour’s worst enemy in their own midst; in fact, he is quite possibly their very best friend at the moment. If only they could see that.
Semi-Partisan Politics 