by René Lavanchy
BACKBENCH Labour MPs have welcomed the new 45p rate of income tax for incomes over £150,000 announced in Chancellor Alistair Darling’s Pre-Budget Report.
The measure, which would not begin until April 2011, is supported by a recent opinion poll suggesting Labour would receive an electoral boost from a wide cross-section of the population if it introduced a higher tax rate.
But there was unwillingness to assert that the move is an abandonment of the
“new” Labour project, while economists have warned that the new rate, estimated to raise no more than £2 billion if carried out, does not mean that the poor pay a smaller share of their taxes than the well-off.
Tony Lloyd, chair of the Parliamentary Labour Party, told Tribune: “We’ve got to avoid a mood of triumphalism that we’re going to “stuff the rich”, but I do think most MPs will be comfortable about this. Everybody is being asked to pay a reasonable share of the cost of the economic crisis. It’s not unreasonable that the better off make a reasonable contribution through taxation.
“You can call it New Labour, you can call it Old Labour… it’s decent, pragmatic Labour delivering to the public something that spreads the cost. The public are now in a position to see that a Labour Government is now more in tune with their needs than anything the Conservatives are going to offer.”
Mr Lloyd also agreed that the 45p rate, which would require an election victory, was effectively the first line of Labour’s next manifesto.
Jon Cruddas, who floated the idea of a 45p tax rate at the Labour Party Conference in September, also welcomed the move. “This is exactly the kind of measure that we’ve been advocating for a while now and it’s good news for people like my constituents in Dagenham,” he said.
“This should be the first stage in re-balancing the tax system so it’s fairer for middle and low income earners, as well as kick-starting the economy in the short term.” He added that the next step had to be tackling corporate tax avoidance, which president-elect Barack Obama has already pledged to do in the United States.
Former rail minister Tom Harris welcomed the tax but insisted it was “not the death of new Labour”, adding: “New Labour isn’t simply about a low tax regime -– it’s about a new political culture in which tax rises, where they become necessary, are only reluctantly imposed… today’s announcement is, fortunately, certainly not that or class warfare or any of that old nonsense.”
John McDonnell, chair of the Socialist Campaign Group of MPs, was less impressed. “The introduction of a higher rate of tax for high earners is long overdue, but the Government’s proposals are hardly radical and delaying them until after the next election is pointless.” The poorest should be taken out of the tax system altogether, he added.
A YouGov poll for the Fabian Society carried out in Autumn 2007 found that 67 per cent of people supported a higher rate of tax for those earning £100,000 and over. Labour voters supported the move by 78 per cent to 18, and Tory voters by 55 per cent to 40.
