Why ‘millions versus the millionaires’ isn’t the slogan we need

Sometimes it is hard to remember how distinct and different the instincts and reactions of Labour Party members are, compared to the people we want to vote for us.

There were around 400,000 members in the early months of Tony Blair’s government. This reflected the extra five million votes for Labour that Tony Blair attracted leading up to 1997. Over Labour’s three terms, party membership more or less halved. It revived in 2010, with a membership surge following the formation of the coalition. If my CLP is anything to go by, many of those members have retained their party cards into a second year.

That means that of those eligible to join the Labour Party in Britain, one in 255 has done so. But that’s just overall membership. As we know, most party members are inactive. They prefer to pay their subs, and vote Labour on polling day. How many of your CLP members are active members? Perhaps one in ten? So on some very rough calculations, one person out of every 2550 adults in Britain is a Labour Party activist. Where I live, you are more likely, by quite some margin, to see a National Trust sticker in a car window than a Labour poster at election time.

It is important to remember this when coming up with instant reactions to the budget. The challenge for Labour yesterday was to come up with an instant reaction that chimes, not with Labour activists, nor even Labour Party members, but with people who voted Tory or Lib Dem in 2010. I am struck by the former TUC head of economics Adam Lent’s analysis on these pages. It’s a real head-scratcher, isn’t it? Either George Osborne didn’t spot the obvious ‘granny tax’ attack that Labour would launch, counterpoised with the ‘millionaires tax cut’ as he cut the top rate to 45p (still five pence more than it was for 12 years under Labour).

In all of the strategising, the negotiations with ‘the quad’, and the endless internal and external debate, did George Osborne, his special advisers and his treasury officials simply miss the obvious link between the two? It is possible. Gordon Brown got scrapping the 10p tax band so spectacularly wrong in his 2007 budget, that one year later Alistair Darling had to announce a compensation package adding £2.7 billion to the national debt. He increased the individual personal tax allowance by £600 to £6035 for that financial year, benefiting all basic rate taxpayers under 65. This meant that 22 million people on low and middle incomes gained an additional £120, although over one million people on the lowest incomes were still worse off. The ministers and the special advisers are different, but many of the treasury officials are the same. Have they presided over a budget foul-up of similar proportions? Will George Osborne be dragged to the House in twelve months’ time to announce a package of compensation to Britain’s pensioners?

Or perhaps there is another explanation. George Osborne knew exactly what he was doing. He has calculated that he can afford, both fiscally and politically, to reduce the 50p top rate to 45p (and probably to 40p before the election) because he believes it will bring in more money. He believes that strong signals around people on high incomes keeping more of their money is a vote-winner. He thinks the instincts of the people he needs to vote in a Conservative government in three years’ time are broadly in favour of competitive rates of income tax. And he calculates that so established is the Tory myth that Labour ‘wasted’ money and the coalition is ‘cleaning up the mess’, people won’t trust Labour anyway.

The 50p rate was never in place long enough to properly evaluate its tax-raising potential. We’ll never know how many top-earners’ behaviour it tipped into imaginative, but wholly legal, tax avoidance. Certainly for 12 out of the 13 years it was in office, the Labour government did not believe raising the top rate from 40p to 50p held any advantages to the economy. Point two in Labour’s 1997 election manifesto, after education, education, education was the pledge: ‘there will be no increase in the basic or top rates of income tax.’ It was another pledge delivered in full, over two terms.

Tony Blair recalls that:

“I wanted to preserve the essential Thatcher/Howe/Lawson legacy. I wanted wealthy people to feel at home and welcomed in the UK so that they could bring more business, create jobs, and spread some of that wealth about…I knew that if we put up the top rate of tax it would be seen as a signal, a declaration of instinct, an indicator whose impact would far outweigh its intrinsic weight.”

So George Osborne might have done it, not only because he thought it the right thing to do, but because he calculated enough people in the country would agree with him.

Labour’s instant reaction was to talk about the ‘millions versus the millionaires’. I have a chipped Labour Party mug from the 1992 election in my loft with a similar slogan on it. It’s the slogan Dave Nellist and chums adopted when they tried to set up a new workers’ mass party a couple of years ago. It’s a neat slogan. It’s alliterative. It creates a clear dividing line between ‘us’ and ‘them’; two great camps, if you will. It will appeal to the one in 255 who have joined the Labour Party, and the one in 2550 who come to meetings. The great question now, post-budget, is whether it chimes with the millions themselves, as they settle down to watch the millionaires Graham Norton, Gary Lineker and Alan Sugar on their TVs, or read about the millionaires Rio Ferdinand, Steven Gerrard and Theo Walcott on the back pages of their newspapers.