- April 5, 2013
- Posted by: Owen Smith MP
- Category: Latest News
Get the champagne on ice and break out the party poppers in readiness for the big event. Tomorrow, April 6, 2013, is a day to remember and a date to savour – but only if you are one of the lucky few.
The day in question is the long-awaited “Millionaires Day”, of course, and the lucky few in question are the 13,000 people in Britain earning a seven-figure salary each year, who are each set to trouser an extra £100,000 as a result of George Osborne’s decision to cut the 50p rate of tax – starting tomorrow.
In Wales, we’re not sure how many people will benefit from the Chancellor’s largesse towards his fellow millionaires, as the number is too small to show up in the statistics. But we do know how many people there are here who earn more than £150,000 a year, and who will benefit to some extent by the cut in the top rate – just 4,000. So if you are one of those lucky 4,000: Congratulations, enjoy your good fortune.
If, however – and this may be more likely – you are one of the 40,000 people in Wales being hit this week by the bedroom tax, or one of the 140,000 likely to lose money as a result of the cack-handed move to Universal Credit, or one of the 400,000 already being hammered by the cut to Working Tax Credits and other benefits, then your appetite for celebration might be somewhat less.
In fact, if you are one of those hundreds of thousands adversely affected by the Chancellor’s austerity programme, you might well feel rather angry.And do you know what? You should. You should because however morally indefensible it is for the Tories to ask millions to pay more in Britain while millionaires pay less, the most infuriating aspect may well be that the economics of the decision are indefensible too. Indefensible in terms of the impact these changes are having on individuals and families already surviving higher costs and prices on low to moderate incomes.
And indefensible in terms of the public finances, which will be also be worse off as a result of the cut to the 50p rate. That last point will surprise some, because the Chancellor keeps telling us that Labour’s top rate “didn’t raise any money”.
At last year’s Budget, when he first announced the tax cut, he even went so far as to get the Treasury to produce a 56-page report ostensibly to show that it raised “hardly any money”. Of course, “hardly any money” means one thing to George Osborne, who could wallpaper his bathroom with fivers if he fancied, and quite another to most other people. And in this instance, his idea of “hardly anything” was £1bn. That’s £1bn that won’t be collected by the Exchequer this year.
And it gets worse as, according to the Treasury’s own report, the £1bn was set to rise to almost £4bn over the spending period – as people’s ability to avoid paying the tax diminished over time. In the first year of the 50p rate’s short-lived application, it’s clear that people were cleverer than the Treasury had anticipated at avoiding the tax by taking income earlier or translating it into other means of remuneration – just as it’s clear that to do so in succeeding years would have become progressively harder.
Still, we’ll never know because the Chancellor has done away with the rate – and with it people’s motivation to avoid it. Perhaps Mr Osborne should have considered all the economic output lost through the future underemployment of tax “planning” advisers. Certainly he should have considered the impact that his cynical and cold-eyed appeal to wealthy voters would have on the millions in Britain and hundreds of thousands in Wales who are now being asked to pay not only for the banking crisis which precipitated the recession, but for the political decisions which have exacerbated its effect.
There was certainly no hint that the situation of those people weighed heavily on the Chancellor’s conscience this week when he visited Wales. Instead, what was in evidence in marginal Cardiff North – don’t hold your breath about holding that one, George – was his standard tactic of divide and rule, as he set hard-working families with young children, who will gain from the voucher policy for extra childcare, against those who will lose due to cuts to Child Tax Credits, the axing of Baby Bonds, Educational Maintenance Allowances and the Maternity Pay.
Divide and rule: Osborne’s strategy and his hope. Parents against other parents, north versus south, haves versus have-nots. The 4,000 top rate tax winners versus the 400,000 tax credit and benefits losers – a telling ratio of 99 to 1. Mr Osborne can continue to speak for the 1%, Labour will speak for the 99.