With so much of the budget leaked, there was inevitably going to be one rabbit in the hat. And sure enough, there it was – a new 50 pence tax rate for those earning over £150,000 a year.
The move comes in defiance of Labour’s last election manifesto pledge, and is probably the biggest political gamble any Labour chancellor has taken since the 1970s. It finally buries New Labour after those boom years when Labour was “intensely relaxed about the filthy rich”, and returns the country to class politics.
This may work electorally – or not – but it is a stunning roll of the political dice. It is based, obviously, on debt and borrowing figures so appalling they make the pre-budget spin look modest. What we have seen is an emergency budget for fiscal meltdown.
Experts are already claiming that the attack on the rich – the 50p top rate, together with the abolition of tax relief on pension contributions for the better off – will raise relatively modest amounts of revenue. So the move is political. It echoes the message from opinion polls, that the rich are to blame for the crisis. A host of small measures targeted to help families, the disabled and (particularly welcome) grandparents who take on the family childcare confirm the message, that Labour is on the side of the neediest, the people on the bottom of the heap.
For Darling’s gamble to pay off, several things need to happen. First, we need to see clear signs of economic recovery on roughly the timescale predicted by Darling – without that, Labour will look like the party that not only got Britain into the mess but is failing to dig her out of it again.
Second, the Tories have to line up against the soak-the-rich agenda, and to promise higher spending cuts. This is Darling and Brown at their cleverest, since although George Osborne has said he would not rescind a 45p top rate, he will be under ferocious pressure from the Tory party to oppose the extra income tax and pension contribution hits. The betting must be that clear red lines will now appear between the parties.
Third, and very importantly, the public have to go along with the Labour analysis, middle class voters as well as poorer voters. There is no doubt about popular feeling against bankers and the City but will people worry about so-called wealth creators being driven away? I’d expect a howl from the financial services industry and a united front against the Budget from the press barons.
Two final thoughts: politics now becomes as interesting as economics has been for the past year. And nobody can ever again call Alastair Darling dull.
View the original article.