Ed Balls’ 50p tax pledge wins surprise backing of Blairites

Big business and most newspapers are putting the boot in – but there’s support from an unlikely quarter

Column LAST UPDATED AT 10:24 ON Mon 27 Jan 2014

AGAINST all expectations, two leading torch-bearers for the Blairite wing of the Labour Party have rallied around Ed Balls and his promise to bring back the 50p tax rate, despite a savage attack by Big Business and many of the national newspapers on Balls and Ed Miliband for turning the clock back to Old Labour. 

Business leaders and City bosses lined up like hooligans on a boozy weekend to put the boot into the two men after the shadow chancellor announced on Friday that Labour would reinstate the 50p tax rate for those earning £150k a year if the party wins the 2015 general election.

David Cameron joined in the Balls-bashing on Radio 4’s Today programme: “If he [Balls] had his time over again, he would spend even more. These people have learned absolutely nothing from what went wrong. They are saying if you give us the keys to the car we would drive it in the same direction into the same wall.”

John Nelson, chairman of Lloyds of London, the City insurance giant, told Today that Labour's 50p tax rate could cause the economic recovery to falter, coming on top of Miliband's threat to freeze energy prices and his proposals for breaking up the banks. Nelson said: “The recovery is brittle. A lot of this does not really encourage investment, particularly from overseas.”

In a clearly coordinated move, the Daily Telegraph reports under the headline ‘Bosses blitz Labour's 50p tax rate’ how 24 business chiefs have written a joint letter attacking the plan. The signatories include Richard Caring, owner of Le Caprice and Ivy restaurants, who – but for how much longer? - is listed as a Labour donor having lent the party £2 million.

Talking to BBC TV, two former Labour ministers, Lord Myners and Lord Digby Jones, both attacked Balls and Miliband. Jones attacked Balls’s pledge as “tribal politics but lousy economics”.

The Financial Times, the Daily Mail, The Sun and The Times all warn against the return to a "confiscatory" tax regime against rich wealth creators. After Balls insisted on yesterday’s Andrew Marr Show that, despite his pledge, the party remains pro-business, a Daily Telegraph editorial says Labour are no more “pro-commerce than a burglar is pro-private property”.

The Daily Mail sticks its neck out and claims that Balls’s plan has triggered a "civil war" in the Labour Party. But none of the Mail’s Labour sources allowed his or her name to be used and, as The Guardian reports, "no Labour MP has broken ranks to criticise the policy publicly".

Indeed, the big surprise is the extent to which Blairite ‘ultras’ are rallying behind the restoration of the higher tax rate.

Barry Sheerman, normally one of the most outspoken critics of Balls and still a huge supporter of David Miliband - seen by the ‘ultras’ as the prince across the sea - came out firmly for Balls last night.

Sheerman tweeted: “I think there is a fundamental change in public mood with a desire for a fairer system of taxation and intolerance of arrogant higher earners.” He said Digby Jones was "always a negative influence and hardly a memorable minister".

Another Blairite ‘ultra’, Lord Adonis, said: “At a time when the incomes of ordinary families are falling, priority should not be tax cuts for the highest earners, but help for those on middle and low incomes.”

Balls’s critics were accused of looking after their self-interest by the Old Labour warhorse Lord Prescott, who tweeted: “Amazed to see bosses and newspaper editors/columnists all earning over £150k seem to be against 50p tax rate. Who'd a thunk it!”

The big question is whether Labour can win the general election, 15 months from now, with Big Business, the City and half of Fleet Street (only The Guardian, The Independent and the Daily Mirror are backing the 50p tax) against them?

Balls insisted to Andrew Marr that it was about Labour's "fairness" agenda and it was not "anti-business - it's anti-business-as-usual". He could not say how much it would bring in - estimates range from £100 million a year (the government prediction) to £10 billion over three years. It is therefore totemic, to show, as Balls indicated, that Labour intend to squeeze the rich, both through the 50p tax rate and the mansion tax on properties valued at over £2 million.

The Guardian is reporting that the 50p tax rate will be only a temporary measure as long as the deficit exists – but that looks to the Mole like spin, intended to bring the waverers along. Ed Miliband himself said in 2010 that the restoration of the top rate of tax should be "permanent". Balls has admitted that the deficit will not be eradicated under Labour until 2020 - the end of a full five year term of Parliament. Make no mistake - the 50p tax rate would last at least for a full Labour term.

Labour know that the move is popular – it’s bound to be, because so few people earn that much. As Polical Betting reminds us, a poll taken back in 2012 when George Osborne cut the top rate of tax from 50p to 45p found a big majority against cutting taxes for the rich.

And a Survation poll for yesterday’s Mail on Sunday found six out of ten voters support the 50p tax rate for the rich, including a small majority of Tory supporters.

But the same poll also showed that most voters trust George Osborne more than Ed Balls to run the economy. Balls is a poker player. This is his biggest political gamble yet. · 

Disqus - noscript

Well as an ordinary bloke stated on TV. "I am a welder and have to pay 40p in the pound, so why not a 50p tax for these very big 'earners'".

...This man cannot be taken seriously. For all of the froth and fuss, Balls is just a barrow-boy in reality, with precious little grasp of the concept of "Cause and Effect".

This will soon blow over - today's news is tomorrow's fish and chip paper.

Lena - I agree with your sentiments, but unfortunately, the figures just don't stand up to scrutiny.

The old fable of the "Goose That Laid the Golden Egg" is very apposite here. The "very rich, high earners" would struggle to afford a house or apartment in the City of London (average house price nudging £750 k) - at current multiples of mortgage availability, a £150,000 salary would only enable a "fat cat" to purchase a home of £450,000, assuming a multiple of 3 x annual salary - a lot of money, admitted, but not enough to qualify as a fat cat in the grand scheme of things.

Add to that little home truth is the fact that the law of diminishing returns applies here - the so-called "Laffer Curve" is simply another way of stating the blindingly obvious - ie that if you keep piling on the pressure of taxation then too many high earners/taxpayers will simply vote with their feet and b****r off somewhere else or, as in my own case (I earned in excess of £330,000 in one very good business year), convince me that paying so much tax on that amount of money was not worth the candle - so I trimmed back my business, laid off 60% of my staff, reduced my earnings, paid a lot less tax and enjoyed life a lot more. I even found time to go fishing occasionally!

The loser, of course, was the Inland Revenue. In Ball's fairyland scenario the loser, again, will be the Inland Revenue and - guess what???!!! - less Revenue means a further-delayed economic recovery. So, in a nutshell - it boils down to the choice of self-destructive political ideology or economic common-sense. I know which I would rather have.

Simples.

Ed is trying to fix the wrong problem. I don't care if top earners pay 40p or 50p just as long as they PAY it. Upping the rate increases the motivation to avoid tax. What we need is legislation to make sure big earners, individual and corporate, pay like the rest of us.

Chris - Once again you do not appear to comprehend what I say. I was simply stating a fact as spoken by a Welder on the box. I didn't say I necessarily agreed with it.

...Lena - what the welder said "on the box" was not a "fact" - it was an observation or an opinion - his perhaps - but not necessarily a fact.

The "fact" of his statement was that he "paid 40p in the pound" - it does not in any way validate Ed Balls' logic or, indeed, invalidate it.

Chris - If you read my post you will observe that I repeated what he said as a fact i.e that during the last or present financial year he, the welder was paying 40p in the £ ,that is the fact. I did not confirm validation one way or the other - in fact I stated "that I did not necessarily agree" which means that I did not equate his statement with the economic philosophy of Mr Edward Balls MP.