On the right track, but a long way to go

Ed Miliband and the Labour Party have rightly been criticised over the last two years or so for lacking policy detail. They’ve opposed pretty much every single cut brought forward by the Government, yet have not outlined any cuts that they would make. In the last couple of days, Miliband has moved to slightly eradicate these accusations by asserting that a Labour Government would bring back the 10p tax rate (abolished by Gordon Brown in 2007) on earnings above the personal allowance, funded by a mansion tax on households worth over £2 million. These progressive measures are an important step forward, but they are far from a seal of approval of their ‘One Nation’ message.

The Labour Party still face criticism for their role in the financial crisis of 2007 onwards, especially from Coalition members on the back foot during ensuing economic gloom. “Cleaning up the mess left behind by the last Labour Government” is a recurring theme that is fair but nevertheless hollow, and it wasn’t the only economic variable of the crisis. Miliband and Ed Balls have been frank, this time, in saying that the 10p tax rate abolition was a mistake. The Conservatives will no doubt counter this by saying that Balls and Miliband were Gordon Brown’s backroom team at the time of the 2007 decision, and this could come back to hurt them in 2015. Nevertheless, it is a sensible move to own up to the mistake; if the country is to trust Labour with the economy again, they will not want a Labour Party completely unrepentant of its mistakes in the 2005-2010 premiership. The poorest taxpayers were the victims in 2007 whilst Brown desperately tried to chase a headline grabbing cut in the basic rate from 22p to 20p, so restoring the 10p rate would be a progressive measure. It also places the Tories in an uneasy position ahead of the March budget; they do not want another “omnishambles” moment.

The mansion tax move is also welcome, but it is not original. It has been a Liberal Democrat policy for many years, and it is only the veto of the Conservatives in Coalition that has prevented its enactment. A few years ago, the Lib Dems initially went further and called for a tax on homes worth over £1 million, but backed down under pressure. It is hoped that the tax will raise £2 billion, far below the optimistic £7 billion estimates, but nevertheless a sign of fairness in austere times. Some legitimate concerns are raised over such a tax, and means testing would be a terrible move, but can blocking the tax be justified when people across the country on low and middle incomes are struggling with Council tax? The levy on houses over £2 million would be 0.1%; hardly crippling. The tactical advantages of the mansion tax are clear; after cutting the top rate of tax from 50% to 45%, are the Tories prepared to be portrayed as the “party of the rich” again? As The Independent alluded to, Miliband could also set the cat amongst the pigeons by forcing a commons vote on the issue, a test of Nick Clegg’s leadership. If such a vote were to occur, Clegg would be sensible to go for the jugular and vote for it, therefore proving not only that a partnership with Labour is possible in 2015, but also that the Lib Dems still have a distinct identity in Government, and are prepared to battle on the side of fairness.

Although the reintroduction of the 10p rate would be welcome, frustratingly the Labour Party has still not come out in support of the flagship Lib Dem (and now Government policy) of raising the income tax threshold to £10,000. I’ve spoken before in this blog of my desire for everyone on the minimum wage to be lifted out of income tax (a threshold of £12,500), and addressed Nick Clegg on the issue; introducing a 10p rate on earnings above £10,000 would be a step in this direction. From a threshold of around £5,100 to £8,100 already in less than three years, a noble cause previously denounced in 2010 as unaffordable by David Cameron is being met, yet the tribal instincts of Labour remain in refusing to support it. If Miliband were also to come out and praise this move, it would strengthen links again between Labour and the Lib Dems, and potentially reinforce an alignment of the Centre-Left. It would also help Miliband in defying the claim that he leads an opportunistic opposition policy that merely votes against every Government measure. Labour would also do well to support the £10 billion pupil premium (another Lib Dem flagship policy; yes they are making a difference!), which is designed to provide extra funding for the poorest primary school students.

Labour still have time to build up more policy initiatives, and it is sensible to release them bit by bit, rather than in one full-blown white paper. However, scratching beneath the surface, the Labour message is still relatively hollow; in short, they oppose every Government cut, yet will not promise to reverse any of them in 2015. This tacit attempt at economic competence is anything but inspirational, and, if maintained, hardly presents the electorate with much of an alternative to the Tory-driven unfair elements of the current Coalition. If the ‘One Nation’ message is to catch on, Miliband needs to pursue policies that offer positive alternatives to the current Government, whilst maintaining that cuts need to be made, but not with the current thrust or composition. Calling unequivocally for a restoration of the 50p tax rate to be in the 2015 manifesto would not only emphasise a fairness agenda, but it would further place unease on David Cameron; it is not easy to defend a tax cut that will benefit people earning over £150,000, and better to propose the measure now rather than before the 2015 election where it can be portrayed as another 1992-esque “tax bombshell”.

I welcome Miliband’s latest policy initiative, but he must distinctly go further in the next two years, offering both a coherent and different economic vision, not one that is essentially “we don’t like what you’re doing, but we’ll continue to do it”.  Pushing for the progressive cause is vital in austerity Britain, and it is a noble cause. Miliband is on the right track, but there is much more to do, starting with an olive branch to the Liberal Democrats.