Two thoughts on the politics of the 50 per cent tax rate.
1) Alistair Darling has given the Tories a ticket out of tax raising jail
The move on the top rate is rightly seen as a political trap for the Tories. (George Osborne hasn’t taken the bait; he has said he has no plans to reverse it.) But the bigger headache for the Tory leadership was always the fact that they would have to pass the bill to implement the higher rate, if they win the next election. This was already upsetting the right-wing grassroots. Darling has now spared them from having to do the tax-raising dirty work.
2) Labour have broken a manifesto commitment
It was always a dubious argument, but when Darling proposed a 45p rate back in November, the implementation was delayed so that Labour could claim it was sticking to its manifesto commitment not to raise the top rate of tax.
Now the measure will be in force by April, meaning Labour will have broken a core manifesto pledge. The advantage? The Treasury will pick up one month of extra tax income before a May 2010 election, raising about £100,000.
Was it worth it?
Jim Pickard
Kiran Stacey