Labour’s tax pledge a lost chance for political candour
On the income tax pledge, which is arguably stronger than previous Labour manifesto pledges, as it includes the new top rate tax, it strikes me as a lost opportunity for candour in politics.
Clearly guaranteeing rates has little or no impact on the actual tax burden. It makes little sense to guarantee no increase in income tax rates, if the same effect is achieved via National Insurance, or fiscal drag and of course, simply disregarding the pledge, as occurred with the imposition of the 50p rate, and more pertinently the 2008 effective doubling of the 10p rate to 20p in Gordon Brown’s last Budget as Chancellor (which funded the lowering of the basic rate to 20p).
The IFS shows that on a wide measure of the tax burden, average households are paying £970 more now than 1997, and will pay £1420 more by 2014/15 under current Labour plans.
In a country run by wise economic sages unsullied by the need to be elected, then this election, with the deficit at a record and the debt heading for a peacetime record, would be an appropriate time to abandon a pledge not to fiddle in the most straightforward way with the most important tax (income tax: £150bn out of £530bn total) in a Chancellor’s armoury.
So what will the Tories do? They must be sorely tempted to match this guarantee, but then they would face a situation where both the number 1 (income tax, £150bn) and number 2 (National Insurance, £93bn) weapons would not be available to a prospective Chancellor Osborne.
My understanding is that they won’t formally match the pledge. The current thinking is that “we’re not getting into these pledges though we can’t conceive of any scenario where we’d raise it (income tax)”.
* A lot was said about high speed rail, there’s a page in the manifesto. Guess what, it’s not coming till 2017, that’s the building work, and that is half way through the parliament after next. Trains aren’t scheduled to be leaving Euston until, wait for it, 2026. Tories think they can start in 2015.
* Lots of rhetoric about industrial activism, inspired by the export-orientated statism of the East. It might explained the five-year-plan-esque manifesto front cover. This is quite a departure from the Third Way free for all of the past 13 years, and obviously begs the question from old school industrial obsessives as to why this wasn’t started earlier.
This type of industrial strategising takes years to come off. The Cadbury’s Law is nothing of the sort, more like a beefed-up national interest test for energy and utility firms. It’s more of a Centrica’s Law.