by Samuel Dale
George Osborne is putting the finishing touches to a Budget that will define our national politics for the next five years.
I have previously written how Osborne is both shifting the centre on areas such as fiscal responsibility and tax cuts while moving to the centre on areas where the public opinion will not follow. In other words, political pragmatism – remember that?
The 8 July Budget will do both. It will cut taxes over the parliament, entrench a smaller state as well as moving on to traditionally Labour areas such as boosting low pay.
On moving the centre, Osborne could create a roadmap to merging national insurance and income tax over the next few years in the biggest simplification of tax this country has seen since the 1980s.
As already hinted by the prime minister, he could set in train moving Britain away from a system of tax credits towards a living wage. A lower welfare, lower tax society.
Or he could build on his outlandishly popular pension reforms from last year with a long overdue reform of savings taxation.
He could do all three and more. In the last parliament major reforms to stamp duty and pensions alongside corporation tax cuts shows a bold Chancellor wanting to get out.
He’s also revolutionised how the self-employed file tax returns and he’s simplifying income tax bands on lower and middle earners.
In addition he has tinkered with savings tax cuts, Isa allowances and inheritance tax on pension pots. The type of crucial small policies to attract the middles classes quietly notice in their pay packets. And sways their votes.
Where has been Labour’s response to this quiet revolution? And how will it respond to the next wave of radical tax reform?
Labour had no worthwhile response on pension reforms, stamp duty changes or savings tax cuts in the last parliament. Nothing. Never mind any of its own ideas.
It has made some noise on problems facing the self-employed and half-heartedly led the debate on business rates reform. Now Osborne has now ordered a review into rates to smartly neutralise the issue, for now.
Instead Labour’s instinct on tax was to bash business, the rich and the mythical never-ending money pot of tax avoidance. It has to change.
Last month, Financial Times columnist Janan Ganesh said Labour has nothing left to say on tax. He claims the party no longer has the courage to make the case for higher taxes for more spending on public services so it is tumbling into irrelevance.
He’s right. Under Ed Miliband, Labour’s tax policy was an incoherent mish-mash of non-dom tax rises, mansion taxes and corporation tax hikes. All tax rises and all drawn from one segment of society.
Sure, there are tonnes of loopholes and avoidance schemes to close but we need a broader mission on how we collect ta as well as how we spend it.
Osborne is at his moment of maximum political strength and thinking big and bold. He has a Tory majority for the first time, no Labour leader in place and, for now, supportive backbenchers sat behind him.
Labour has to get its act together or it will be playing catch up all parliament on the new political mood, just like in 2010.
Where is the convincing narrative on shifting the burden on taxation from productive income to unproductive property or wealth? Simply throwing out a complex and narrow mansion tax is hardly sufficient to chart a compelling vision. Especially when it is promoted as a tax grab on “the rich” not a more radical shift in how we shift the burden of taxation.
Or who is talking about the mass simplification of tax reliefs that have fuelled avoidance and complexity? Buy-to-let landlords receive £5bn a year in tax relief, wealthy pensioners get tens of billions and many other tax reliefs are abused to the tune of billions. Piecemeal reform is not enough, there should be serious thinking about how to make it work better.
Or its own reform of savings taxes? Labour has been a rabbit in the headlights over popular middle class tax cuts to savings in an era of uber-low interest rates but no agenda of its own. Labour invented Isas and revolutionised tax free savings so it’s time to get that reformist spirit back.
Or income taxes? I have no idea whether Labour supports increases to the personal allowance. Miliband’s plan new 10p tax band was confusing and buried in the manifesto. And where do we stand on increasing 40p income tax bands for middle earners?
This is big stuff that affects millions and Labour could be leading the debate instead of timidly nodding through Osborne reforms as though it has been caught by surprise.
The leadership debate has been supremely lacking vision making Labour look tired and void of ideas. Meanwhile a new Tory majority makes them look invigorated and adventurous.
Tax is a key battleground this parliament and the leadership candidates must begin to sketch out a alternative vision next week. We need to start talking about tax.
Sam Dale is a financial and political journalist
Tags: budget 2015, general election 2015, George Osborne, Labour defeat, Samuel Dale
Of course Labour has a policy on tax.
It’s called “gesture politics” where Labour say they will do things which in reality achieve nothing.
Rather like their policies on everything else…(see the Leadership election for lots of examples..).
It’s not as if The Tories are run by a political giant like Thatcher… They are run by a David Cameron.. But Labour have no-one half as good (bad?) as he is … which is the problem…Political pygmies rule.
I reckon if Labour will choose Corbyn as a Leader…it will provide the impetus to have a fresh rethink.. as the results will be a real disaster..
Choosing any of the others- “nonentities” is a kind word to describe them- will just delay the fresh thinking needed for another 5 years for the 2025 election..
Of course the Tories may go into meltdown…in which case Prime Minister – insert name – will be a disaster.
Taking the working poor out of tax and making work pay should have been Labour’s policy now the ground is occupied by the Tories. The main problem of purpose when there’s still no money remains.
Good article. Basically, George will b stealing all the Labours clothes on Tax!
Simplifying Tax Credits, raising the Min Wage or even introducing a Living Wage
getting tough on Tax Avoidance, bringing together NI and Income Tax which is just an excuse forb increasing NI as Frank Field has suggested. As the writer says Gorge has got it made for the next 5 years. He’s probably going to scrap Bedroom Tax and the Pasty Tax and the Granny Tax as well just to make everyone feel better.
And Labour has …. b***er all in response. Hate to be whoever is Shadow Chancellor at the moment replying to the Budget Speech. Maybe they’ll be talking about a review of Council Tax and taking more people low earners out of paying tax and squeezing the wealthy with a Double Wealth Tax, and getting even tougher on Tax Dodgers. And Inheritance Tax, abolishing that and introducing a Death Tax instead. Not a good time to be Shadow Chancellor.
Well I dont know about you sammy mate but I didnt come into politics to make wayne rooney pay more tax.
“Buy-to-let landlords receive £5bn a year in tax relief”
Do you mean because they pay tax on profit instead of revenue? Like every other business in the UK?
This is what happens when you fritter away five years being `all things to everybody` – when you don’t have a leader you have nothing to fall back on. Interestingly, at least the lib dems can say they were in government to influence things.
….. would you believe it!!! The Tories wanted to make everyone a home owner in the 80’s, and now they want to make everyone a millionaire!!! You couldn’t make it up!
Because that’s going to be the effect of George’s holiday on Inheritance Tax. on Wednesday. So this is what Tories mean by eradicating Poverty! Britain will be deprived of the Poor.
It a problem because what Osborne is doing is what New Labour wanted to do. You do not Need Reeves to hammer down or to ensure the poorest are looked after those in work of course, because the Tories are ensuring the Min wage rises faster then labour.
They are cutting tax and allowing people to pass a home on to children brilliant move.
Labour has little choice now but to be a party of opposition if it does not then it could be a new record of the years labour are out of power.
We do not need two parties of the center the one in power will always be the better at it.
Tory Lite is no longer needed.
Of course Labour has no policy…they have vague, shallow and inconsistent press releases, feeble muttering so by the Losership candidates trying to use failed outdated PR methods to create headline press stories…that nobody notices lol….but actual policies? We are talking about the Party that thought multiculturalism was about accepting primitive undemocratic uneducated beliefs into this country and encouraging them at the expense of the victims. Who thought religion was something to generalise and look down on and herd, and that fighting the Conservatives was about attacking the rich and ignorant whilst being rich and bigoted.
I think the leadership will do all they can to avoide discussing issues that will be bought and sold through the proper lobbying channels. policy has a price tag and is not open for discussion by plebs especially members lol…they can’t be trusted and business is business for the rich and wealthy Labour Losership. Keep on envying the Tories, keep on hating business, keep on delivering those leaflets and leave the deals to your betters who do not need to understand policy just the money they can make from it.
Labour’s policy on tax is crystal clear in message and simplicity itself:-
1. Get more.
2. Piss it up the wall.
Labour must answer these questions:
1. Is the government the answer to everything now God is dead?
2. Can we make people richer by taking from the rich and giving it to the poor?
3. Equality: yes, but how far do we encourage people who really want to make a difference to their family’s and to other peoples’ lives?
4. Are all rich people crooks?
5. Who, exactly, are the vulnerable?
Whenever parties change leader there is always uncertainty during the changeover. This is no surprise
Of course they they have a policy on tax, it’s quite simple, it all boils down to: More of it.