Labour's inability is hard to comprehend. It's slaughtered in local elections. It is four weeks from a general election. And its big idea? Increase the tax on those earning £80,000 who are already paying what they owe. Very politely, I despair.
I am not arguing against more progressive taxation. I am in favour of it. I am instead arguing three things. One is that hitting those already paying is not the brightest idea, even if they are in the top five per cent of the income stream. The second is that economics is not everything. The third is that where economics is the issue talking something more than tax may be appropriate for once.
Let's be clear, earning £80,000 makes you well off. It's a privilege. It affords things many can't enjoy. So I am having no truck with the argument that those earning that much aren't well off. But, those who do so and who are employed (and quite a lot will be) are already paying their taxes. And they are likely to be the ones paying most of any increase. This makes the move poorly targeted in election terms. The country is not seething about the pay of head teachers, hospital consultants, university professors (yes, that's me) and higher, but still mid-tier, managers. So there is precisely no sympathy gained from targeting them, and some antipathy generated.
The country is instead angry about low corporation tax rates.
And low taxes on returns to wealth.
And tax abuse.
So the offer should be to raise corporation tax.
And to equalise the capital gains tax and income tax rates.
And to make sure that every small company pays its taxes, in full, by ending the abuse of limited liability.
It could be about an additional tax on rents so that they are taxed at the same rate as work when national insurance is included. And that rate could be applied to all investment income and the so-called dividend tax could then be scrapped.
Those taxes would work. And be fair. And popular.
As would some moves to reduce allowances for higher rate tax payers (pension relief to 30% would be a start) also hit the right justice targets. After all, why should the savings of the well-off be subsidised more than those of everyone else?
These moves look left wing. They target non-earned income. And abusers. They increase equality. They raise revenue. They only alienate Tories. It's really not hard to work this stuff out.
But then there's the issue of whether tax should be centre stage. People aren't voting on tax, after all. They're voting in Brexit. And Labour is saying nothing at all about what Brexit might do for Britain under their leadership.
It's not saying Brexit might make it easier to control the banks.
It's not saying Brexit let's the UK stop some tax abuses such as Luxleaks style arrangements.
It's also not saying Brexit lets us stop unfair competition from tax havens.
And it's not saying Brexit will permit easier enforcement of UK rules on migrant labour to level the playing field in work.
I have no idea why.
But most of all Labour is not making an economic case for a post Brexit era.
So it's not saying that after Brexit Labour could require that 20% of all pension contributions be invested in UK job and wealth creating programmes as a condition of the tax relief that they enjoy. The last time I looked that would raise $16 billion a year for housing, green and innovation investment in the UK.
Nor is it saying that Labour could use QE to buy out ruinous PFI schemes, but I have no idea why not.
And it's not saying that Labour could, after Brexit, offer a national savings ISA that would invest in the UK, paying 2% per annum tax free to £5,000 of interest a year. Sure that's more than the cost of government borrowing, but after inflation it's a net zero cost to the government and the best savings product on the market. This would see money pour in. And what could it be used for? Start with social housing and the Green New Deal plus a dedicated transport fund. It also provides regional investment funds for each devolved government and region - and people can direct their money to the area they want. Think that what that could do. Pension saving would also be allowed in this fund. Cash would be liberated for the future investing in what we need now.
This gets the economy going again. And how is a return made? If we can't make 2% on housing, energy, transport and providing equity and loan investment for British business I respectfully suggest we're in deeper trouble than anyone is acknowledging or critics are talking nonsense.
This is what Corbynomics should look like. Getting tax right and selling it as a deal whilst exploiting Brexit to build a whole new future by investing in high quality jobs in this country making things we really need.
And this is precisely what Corbynomics does not look like right now and as the person who invented most of what it was meant to be I have a right to say so.
But I'm not expecting to be listened to. John McDonnell never did that. I hate to say it, but he's just not left wing enough to do the right thing for Labour. He'd rather play with the austerity narrative and talk about who will pay for balancing the books. And that's what makes me despair of Labour's hopes right now.
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How do you raise taxes in a country with a back door open to tax havens and a front door open to foreign investment in major sectors and a hallway going direct from one to the other?
That’s Mayland for you
I’m sorry to say that you are correct right across the board.
What the interregnum actually looks like is becoming more evident every day.
With answers like this, it is though Labour are trying to grab a lifebuoy with their fingers covered in anti climbing paint.
I appeal to all Labour MPs and candidates to find people in other parties (even Left Tories) to work with where you can and make a better politics begin to happen.
We will just have to weather it for now.
I think that I have found something to help me keep getting up in the mornings in the meantime besides my increasingly difficult and underpaid job that I may not have in less than 10 years from now or less.
We already know what the lines of Conservative attack on Labour will be :
– Vote labour and you will end up paying more in tax ( Labour always = tax & spend )
– Labour cannot be trusted with the economy
– Labour cannot be trusted with Brexit
– Corbyn is a weak leader of a divided party
Todays announcement at least tries to deal with the first of these by guaranteeing that if you earn less than £80k pa you will NOT pay more under Labour, so it is logical – your attack is unwarranted.
On the economy I agree a much more positive case is needed and the focus should be increased investment, both public and private. In particular the role of government should NOT be to increase the profits of corporations (and short term returns to capital) through corporation tax cuts, but to structure incentives to increase private INVESTMENT in the UK national and regional economies. Here your suggestions on savings vehicles are very helpful, but I would like to go further on R&D to keep UK SMEs at forefront of technology. I despair of one day getting people to understand the German Fraunhofer Institutes, or their investment in apprenticeships, and why this huge long-standing investment helps them dominate in Global markets.
On the final two attack points sadly Labour is completely lost. Corbyn and his team cannot provide effective leadership and they have failed to present any credible alternative vision of Brexit. This is why the losses at the General election will be even more catastrophic than those just suffered at the local elections.
I am not saying Labour was wrong to say this
But it’s not a policy
It’s a backstop that had to be said
Another John Smith moment
A very interesting piece. I am a fan of the site.
You’ve got my vote.
It’s on odd strategy because you are not just talking about those already paying tax and earning £80k now, but all the other hardworking middle-income earners, who may be ‘hoping’ someday to be earning an achievable £80k in the future so perhaps they can afford a deposit for a home or start a family etc.. Where costs of living (transport, housing etc..) are particularly high this will be more pronounced. It’s a perception thing, and for politicians that’s got to be important hasn’t it?
Needless to say, brexit was clearly not a protest against those earning 80k and paying their tax, but the massive concentrated wealth that still sees great increases in its wealth every year on year – the super-rich (that’s wrapped up in multinational corps and offshore vehicles that avoid contributing what they should be doing, and as a result enjoy serious anti-competitive behaviour that hasn’t been touched.
When is any party going to get it? It’s not even a old-fashioned right or left thing, you could get virtually the whole country behind this if it was clearly focused on and communicated.
I’ll make sure this great piece gets shared amongst Jeremy Corbyn supporters on social media.
And to make sure that every small company pays its taxes, in full, by ending the abuse of limited liability.
Politely, that’s far more likely to make you unelectable than raising tax on the well off. It’s morally right – but this is not a moral country (you can see that from the behaviour of its popular press)
Just playing devils advocate. Maybe, just maybe, Labour doesn’t want to win?
Brexit is a right wing Tory/UKIP manifestation at heart. With two years left before Brexit proper it would appear to be a poisoned chalice. I could foresee bitter sniping from Tories/UKIP/right-wing press if somebody else were to run with it. When Brexit goes pear shaped, which it most surely will, Labour could well be tarred with a similar brush – the Tory press would guarentee it with headlines like “Labour screwed up Brexit”. Sadly people would believe them.
Labour have been wrongly castigated for profligacy after the financial crisis when your own research would say it was the subsequent Tories who were – at mostly other peoples expense. Maybe once bitten twice shy?
It’s just an idea, and GE2017 should be more than just about Brexit, like what type of country will this be by 2022? Worse than in 2017 is the simple answer.
I can see the rationale in your comment “why get elected when to do so will lumber yourself with Brexit”.What this country needs is a government that as the vision to radically change present day society based on free market economics to one based on democracy and social justice. Dealing with Brexit is part and parcel of that vision so by not being involved in creating a just society is simply a cop out. If Labour is flattened as the opinion polls suggest many on the left could console themselves with your idea but their will be letting themselves and the millions down.
But maybe your right after all who would want to do the dirty work in running down the economy,health service,education and society in general that’s too risky better get the Tories to do it. And when the people get sick of it all get someone like Blair to get you elected while continuing with free market economics.
vote on June the 8th. Derek
As you say, what’s really worrying is the headline itself: https://www.theguardian.com/politics/2017/may/06/labour-tax-80000-general-election-promise.
Not left wing enough. Hmmm, he and his crew are not bright enough, nor are they brave enough.
Ignore the labour party, most labour mps accept the neoliberal agenda and have nothing to say about the emergent somewhere/anywhere divide.
‘And Labour is saying nothing at all about what Brexit might do for Britain under their leadership.’
Absolutely. Labour could have made this central to their agenda and stole a march off the Tory ‘strong and stable’ narrative.
If McDonell & Corbyn won’t adopt these policies then there’s no hope anyone will in the labour party as they’re already castigated for being too left wing. We’re doomed
While McDonnell and Corbyn will pay lip service to Richard’s ideas the fact remains their politicians who only listen to themselves. When an expert like Richard comes along with real ideas to challenge the dominance of free market economics their attitude is to see it as a challenge to their power. If the opinion polls are right to be believed and Labour are flattened then hopefully their will eat humble pie and realize the need to take on board ideas from outside their own inner circles
vote on the 8 of June Derek
I think the policy is a good starting point but needs to be combined with many of the policies Richard suggests. I’d also suggest a General Anti Avoidance Rule. But it may be that much of these ideas end up in the manifesto; my hope is that John McDonnell is more radical than Richard thinks he is!
A sharp prod can do no harm now then
I will be giving it on the Today programme in the morning
It’s interesting that you mention diverting pension contributions back into the UK and may well work. It appears the pension funds themselves aren’t that willing to do it themselves : https://www.ft.com/content/fb18e676-475b-11e5-af2f-4d6e0e5eda22
I wonder how much the pension funds are invested in the tax evading multinationals like google etc? I also wonder how many ‘liberals, centrists or even hard core left wingers’ are using these pension funds for themselves (consciously or not) and as a result are collectively supporting massive libertarian tax evasion that’s destroying funding for the public good such as the NHS. This group may stand up for self-evident principles such as ethic equality and feminism etc.. note though they in and of themselves are in no conflict with the libertarian super-rich, yet by being investors (albeit indirectly) their pensions are participating in furthering the great chasm between extreme wealth and capital, and the society (populace) from which it generates its massive revenues.
Some pension funds like tax avoiding: that is a fact
It helps make their short returns
Stock Loan enables Tax Arbitrage. An essential part of the Investment Bank toolkit. Only, don’t talk too loud about it.
I agree
A massively under-noted issue
Pension funds have a history of investing in the private equity industry (such as KKR) boosting leveraged M&A activity in many industries (reducing competition), Pension funds have a long history in investing in the likes of the FTSE100, S&P500 and even NASDAQ more so (with some of largest tax evading corps). Pension funds have been a direct source of cheap debt financing (particularly after the credit crunch) to the largest of all multinational corps. And there’s more, an entire book could be written how ordinary people’s money has been accessed by the wealthiest players and corps operating by their own tax evasion ploys..
Pension funds are a cornerstone of cheap ‘other people’s capital’ for these guys! Pension funds by investing in them on the stock market are their greatest cheerleaders!
This system has been operating like this for too long, it’s time to start giving people the opportunity put their own money (in the collective form) to work for them, as you say by investing in their own country. It’s kinda obvious when you think about it.
We need proper pension accountability
We have almost none
It’s interesting that you mention diverting pension contributions back into the UK and it may well work. It appears the pension
funds themselves aren’t that willing to do it themselves : https://www.ft.com/content/fb18e676-475b-11e5-af2f-4d6e0e5eda22
I wonder how much the pension funds are invested in the tax evading multinationals like google etc? I also wonder how many of us and people we know, people who are ‘liberals, centrists or even hard core left wingers’ that are using these pension funds for themselves, but are (possibly unwittingly) as a result are collectively supporting massive libertarian tax evasion that’s destroying funding for the public good such as the NHS. This group will stand up for self-evident principles such as ethnic diversity/equality and feminism etc.. ( note though they in and of themselves are in no conflict with the libertarian super-rich), yet by being investors (albeit indirectly) via their pensions are participating in furthering the great chasm between extreme wealth and capital, and the society (populace) from which it generates its massive revenues.
[…] this empowerment is at the heart of why I think (as I suggested yesterday) letting people use their savings and their pensions to direct the local economy is key. And it is why I think that high quality data that can show […]
I can’t escape the knowledge that the rot in HMRC started under Labour; nor the suspicion that some of the privatisers in the Brown cabinet weren’t all that unhappy about it.
Fortunes were made, and lost by the Treasury but not the Private Sector ‘Solution Partners’; and I can point to the lucrative retirement of more than one of Brown’s ministers who sponsored those policies and those profitable partnerships. Not all of them retired from politics; fewer still will speak up and campaign against the massive tax evasion that exists today.
Worse things have happened since then; certainly, a far worse government. But one of the most damaging things is that Neoliberal belief systems, including the deceptive and destructive cult of Austerity, have infected the Labour front bench. Or, at best, the current crop of Labour Front-Benchers have succumbed far enough that there is no unwillingness to challenge these narratives.
I wish the Labour Party well – better, certainly, than those who oppose them – but they are campaigning for a social and economic vision described and circumscribed within the language and ideas of their opponents.
I tried to make that last point ion Radio 4 this morning….
I missed that – I’ll see if it’s still up on the iPlayer site.
Meanwhile, I am anxious to avoid the folly of the French far left, who would rather abstain and watch a hard-right authoritarian racist pass unopposed, that vote for a centrist who’s effective in opposing her.
I agree with that
[…] my concern, developing ones discussed here yesterday, was that John McDOnnell had made a political mistake by announcing this policy now and in a void. […]
Why are you putting the boot into the Labour Party four weeks before a general election? It’s a bit late in the day to expect them to come up with something really different to what they’ve put out without seeming like they don’t know what they’re talking about, or that they aren’t steady. Don’t you think a bit of discipline might serve us better? You should save this sort of critique for after the election as you are playing into the hands of the Tories, the Tory press, and giving Radio 4 more chances at ‘analysis’ of Corbyn’s politics.
I am not a member of any party
I was suggesting that McDonnell really isn’t helping himself
That’s because he isn’t
I have no compunction in saying so. I want coherent policy and I am not getting it
“Why are you putting the boot into the Labour Party four weeks before a general election?”
Why has Corbyn wasted two years on cheap stunts inefficiently executed? Why has he made no effort to lead his party, rather than peddling vacuous platitudes and trying to rig the internal election system? Why has he failed miserably to perform the duties of a leader while blaming someone else at every turn?
Labour isn’t fit for purpose and it’s time for Corbyn, Momentum and the party as a whole to face that fact. There’s never going to be a perfect time to deliver bad news, but we’ve waited too long already. Let’s not put off this most necessary debate any longer.
I agree with everything you say Richard and everything i have read, so far in ‘The Courageous State. I understand your frustration but you are more likely to see at least some of this happen under a Labour Government because there is no hope under another Tory administration, though one of the above points about Brexit being a poisoned chalice for the Tories, makes me wonder if right now, letting the Tories back in and watching them implode over the next 2 years, whilst Labour get their head around a well thought out economic alternative, is not a bad strategy.
[…] set out his argument in more detail in a post on his blog yesterday. In it he argued that McDonnell was “just not leftwing enough to do the right thing for Labour”. […]
I liked what Jeremy Corbyn said about an economy that works for all because it aligned very closely with our own efforts to modify capitalism. It was unfortunate that we found a Blairite government in power at the time. https://medium.com/@peoplecentred/an-economy-that-works-for-all-8dd4fe809eaf
Unfortunately those policies, if in a manifesto, would not enable said government to get votes from an elecorate that voted mostly for right wing parties at the last election.
Also Richard, can you please put to bed these rumours about you asking for a peerage in return for advising Corbyn and McDonnell.
I was offered a peerage
That’s something very different
And McDonnell leaked the story
Which says a lot about him
Most accounts of the story have it that you requested a peerage and it was declined. Do you deny that?
Yes
They were trying to find a way to pay me
A peerage was a way to do that in their view
And what’s the big deal?
There are so many open goals it makes me despair of the labour party let alone reasonable tories and the other parties that stuff like the following happens without a whimper…
From the Tax Justice Newsletter published today:
Quote—————————-
Notable events since our last email to you include the disappointing news that the UK’s Criminal Finances Bill amendment was quietly dropped. It would have obliged Britain’s Overseas Territories (including such secrecy havens as Bermuda, the British Virgin Islands and the Caymans) to create fully public registers of the beneficial ownership of companies.Hopes were riding high that at last this door inviting corruption might be closed, at least as far as anonymous company ownership was concerned.
But, as we blogged, it wasn’t to be…so near, and yet so far.
Although there’s little information, according to journalist Ben Lucas the government set up a meeting between Overseas Territories and House of Lords representatives hours before the transparency reforms were due to be debated. Representatives from Bermuda, the Cayman Islands, the British Virgin Islands, Anguilla and Montserrat were present at the meeting. The Home Office declined to comment.
End Quote—————–