This is the politics of a government that divides

28th November, 2012 5:19 pm

George Osborne’s decision to cut the top rate of tax for the richest was the moment this government’s facade of fairness disappeared for good.  In these tough times, against the backdrop of the biggest squeeze in living standards for a generation and with the economy flat-lining, the Chancellor prioritised the millionaires above millions of working people.

There are 30 million tax payers in this country and the Chancellor decided to give the wealthiest 1% a tax cut. Of those 1%, there are 8,000 people who take home over a million pounds each year. From next April, each of these individuals will be given a tax-break worth on average £107,000.

It is not surprising that the rest of us look on in disbelief. For pensioners being hit by the Granny Tax or a family with children, who are £511 worse off this year because of further cuts, freezes and restrictions to benefits and tax credits, the decision seems perverse.

It is not merely a spectacularly unfair change to our tax system. It also reveals the Conservatives’ inability to be a Party of One Nation. A former speech-writer to David Cameron described the decision as ‘sending a missile into 6 years of modernisation’.  After all those trips hugging hoodies, sledging with huskies and pretending to go green, the Chancellor destroyed any remaining credibility that the Conservative Party could govern for all.

Last week, the Prime Minister compared the economic situation to that of war. We are facing a period of national upheaval – we need to cut our deficit, rebalance our economy and build a fairer society. In the face of this challenge, Cameron and Osborne have shown a distinct lack of leadership.

During the Second World War, the public queued to get their copy of the Beveridge report because it set out the beginnings of a welfare state where everyone had a stake. In the aftermath of war, that same sense of national mission led to the creation of the NHS. The public, especially in tough times, long for a sense of collective spirit – as we saw in those Olympic weeks in the summer.

But this government does not understand this need for one nation politics. When historians write about this period, they will say this government was confrontational, failing to inspire and unite. Of the richest who are receiving Osborne’s tax give-away, 85% are men. At the same time, 70% of the revenue raised from direct tax and benefit changes are to come from women. Over half of the millionaires in this country live in London and the South-East, and at the same time we see long-term unemployment rise in the north.  The millionaire’s tax cut embodies the hypocritical notion that the poor are expected to work harder because otherwise they will be made poorer, but the rich will only work harder by making them richer. This is the politics of a government that divides.

Ed Miliband’s One Nation Labour understands the need to bring people together and to share the burden of sacrifice fairly. We must be the party that stands up for the private and the public sector, the north and the south, middle income families and those in poverty.

That is why today, in the debate on the millionaire’s tax give-away, it was the Labour Party which stood up for vast majority who are struggling whilst the economy is flat-lining. It is why each time a Tory MP stood up to defend the decision, I was reminded that we are the only party that can govern for One Nation.

Rachel Reeves MP is the Shadow Chief Secretary to the Treasury

  • Dave Postles

    I fail to understand the complexity of Osborne’s approach to corporation tax. In the last budget, we had new rules for CFC/PCFE on foreign profits by UK companies. Now I read about the possibility of a FATCA-like rule being introduced. Could someone clarify?

  • JoeDM

    But if the old 40% top tax rate was perfectly good almost all of Labour’s period of government. Why is it so bad now?

    Do I detect a whiff of hypocrisy?

    • Gabrielle

      No, because Labour would not have given millionaires a tax break when everyone else is really struggling. The tax rate during the good years was appropriate then, but not now.

  • Quiet_Sceptic

    I completely agree with the attack on the Tory tax cut for the rich but I think it’s a bit premature to declare us as the One Nation party.

    I recognise this is a ‘ra ra go Labour’ article rather than anything genuinely reflective but as the years continue to roll by, at some point we are going to have to come up with policies to deliver this One Nation vision whilst dealing with the deficit.

  • Quiet_Sceptic

    I completely agree with the attack on the Tory tax cut for the rich but I think it’s a bit premature to declare us as the One Nation party.

    I recognise this is a ‘ra ra go Labour’ article rather than anything genuinely reflective but as the years continue to roll by, at some point we are going to have to come up with policies to deliver this One Nation vision whilst dealing with the deficit.

  • Quiet_Sceptic

    I completely agree with the attack on the Tory tax cut for the rich but I think it’s a bit premature to declare us as the One Nation party.

    I recognise this is a ‘ra ra go Labour’ article rather than anything genuinely reflective but as the years continue to roll by, at some point we are going to have to come up with policies to deliver this One Nation vision whilst dealing with the deficit.

  • Serbitar

    Are the sick, disabled, single parents, unemployed and other kinds workless benefit claimants also to be subsumed into Miliband’s fabled One Nation? Or are such people earmarked to become something less than equal citizens in Labour’s New Albion? Less valuable and too undesirably different from all those admirable alarm clock Britons, grafters, strivers, and members of hard-working families to be considered worthy of much beyond contempt? With Liam Byrne as Secretary of State at the DWP the answer can only be a thunderous and resounding, “No!”

  • I think you’ll find that it is not true that “there are 8,000 people who take home over a million pounds each year”. There are about 8,000 people who are paid that much (footballers, entertainers etc. et al), but those will be paying into pensions and paying a marginal tax rate of 45% . Thus it is likely that they are taking home about £500k. As Shadow Chief Secretary to the Treasury, I would expect you to get your facts right.

    If we are to have a debate on this, and I think it is unlikely, we need to understand why the marginal tax rate under Labour was raised to 50% so late in the day. It would also be interesting to see what a “One Nation” income tax system might look like, and how much it would raise. Given that income fluctuates most at the margins, is it sensible to have a tax system that is designed to raise most of its revenue there?

  • sdrpalmer

    Considering the wholesale avoidance of tax in the UK, I am starting to think that lower tax rates and coupled with stern enforcement might be the way to generate higher tax revenues. If the gains for avoidance were reduced and penalties for evasion strengthened, we might see more millionaires pay their taxes.

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