Wednesday, 2 March 2011

Tax: it’s the politics, stupid

Not content with the questionable strategy – not to mention thoughtful gift to David Cameron – of our insisting on the extension of 50% tax band indefinitely, Ed Balls has now indicated in a Progress interview that he is thinking about implementing one of his leadership campaign planks as well, and lowering the threshold of the band.

Now, I have no doubt we could usefully use the money to invest in public services.  But before we get into the classic Labour argument of how much money you can make, or not make, by taxing the rich, let’s pause for thought and consider the following argument.

It.  Doesn’t.  Matter.

The question right now is political, not economic.  It is about perceived competence; the fact that we are in opposition, not government and its impact on the way we do things; and, most importantly, our electoral future.  These are things that both Blair and Brown keenly understood, and that is why they were successful.

Firstly let’s state the obvious - we are currently not perceived as economically competent, for better or worse.  I know, Balls is starting to take that argument to the Tories, and I hope he wins.  But given that he is being labelled as part of the problem, fairly or unfairly, it is essential that he combats this by showing a Brown-in-his-Iron-Chancellor-phase fiscal prudence which shores him up politically in the eyes of the electorate.  This move says precisely the opposite.  Regardless of the actual fiscal effect, the symbolism is Brownite tax-and-spend, in the eyes of the media and, quite probably, the country.  The fact that few will be affected or that it plays to the current, populist, bash-the-bankers sentiment is not the point - by the next election, popular anger towards the bankers will have been long forgotten and people will be thinking of their own pockets.

Also, we are no longer in government.  In Opposition, our every move is watched for its political content and tone is often more important than policy detail.  Although we certainly need more policy meat, at least at high-level, to get past our blank-sheet-of-paper problem, everything must be filtered through the prism of sensible political presentation.  Unlike many, I was delighted to see a bit of control coming back into our presentation – let’s be clear, this is not insane control-freakery.  It’s called coordination, and it’s exactly what a professional political operation must insist on in an age of 24-hour rolling media.  The Tories do it and so must we, or be left behind.  But here, instead of a formal policy announcement making everything clear, Balls has announced vaguely, in an interview, what he might do.  Hence, bad news story for no reason.  Wrong, wrong, wrong.

Finally, let’s look to the future.  The words “hostage” and “fortune” spring to mind.  Do we honestly think that the Tories, a tax-cutting party, will go into the next election suggesting to keep the 50p band?  Of course not.  It will be the perfect instance of a Brown-style “dividing line” between us and the Tories.  Some of you may not remember the 1992 Labour’s Tax Bombshell campaign by the Tories – one of the most successful of all time.  It killed us electorally, almost single-handedly.  Well, the 21st Century sequel is on its way, coming to a billboard near you from early 2015.

A month ago, when Balls took the job, we argued here that he would need to watch the politics, not just the economics.  John Rentoul independently argued the same point about politics and economics here on 11 Feb.  Balls is brilliant at the latter, and we should be pleased about that: we have a first-class mind to joust with Osborne.  He knows how to run a department and could be a great Chancellor – if he ever gets there.

But as the redoubtable former Australian Prime Minister, Paul Keating, delightfully put it: “Don’t ever put up income tax, mate. Take it off them anyhow you please, but do that and they’ll rip your f***king guts out”.


A winning economic strategy needs a winning political strategy as well. Without that, we’re all dead in the water.

This post first published at Labour Uncut and 
featured in The Week Uncut, the most popular pieces of the previous 7 days.

2 comments:

  1. Labour is trying to be all things to all men - and failing miserably. Miliband sees how toxic the inheritance of Blair-Brown is and wants to rebrand ZaNuLabour. The white working class got the royal shafting. It will take quite a while before erstwhile lefties comme moi-meme decide that Labour is worth a bet. (Can anyone really see Miliband as P-M material?)

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  2. Entirely agree that we are trying to be all things to all people (mostly ourselves, rather than the public!) Also true we need to "detoxify the brand" (see Peter Watt's recent article at Uncut). Not convinced to date on the direction.

    And certainly if we don't resolve the tax question to the electorate's satisfaction, we're, er, doomed.

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