The politics of tax pledges - RSA

The politics of tax pledges


Having argued just a few days ago for an increase in tax for the highest earners to help fund public spending and tax cuts that help the poorest, it is beholden on me to applaud Alistair Darling’s announcement of a deferred rise for those earning over £150, 000. By delaying the increase until 2011 Labour can remain true to its manifesto pledge to maintain income tax rates.

Over the next 24 hours we can expect to see footage of Tony Blair and Gordon Brown signing the first income tax pledge back in 1996. Darling’s move will be portrayed as a watershed and, for some, the final nail in the coffin of New Labour. Given that today’s move is, we understand, to be justified not just in terms of fiscal rectitude but also fairness this is a significant shift (although the contribution the higher rate increase will make to the overall fiscal gap is pretty small). Polls taken before the financial crisis did not suggest much appetite in the electorate for redistribution, but now we all know we are going to feel pain down the road the voters will probably think it right that the best off make their contribution. The public may also approve of Labour’s political courage – it is not often that the first pledge to go into a Party’s manifesto is to raise taxes.

But if Darling’s announcement goes down well commentators from the left should resist the temptation to argue that Labour should never have made the tax pledge in the first place. In looking at the opinion polls leading up to the 1997 election some analysts have argued that the Blair modernisation project was unnecessary. After all, the decisive decline in Tory support happened immediately after Black Wednesday (when John Smith was Labour leader) after which Conservative support flat lined right up to their election rout.

Attempts to reconstruct history usually provide more insight into the prejudices of the person doing the reconstruction than say anything useful. No one knows what would have happened had John Smith lived. But the last 18 months have certainly taught us three things. First, holding on to a poll lead is just as hard as grabbing that lead; we are now in our third major swing of the pendulum since Tony Blair left office. Second, there is no simple correlation between the state of the economy and a Government’s performance in the polls. Third, once things start turning against you, they take on their own media-fuelled momentum – just ask George Osborne.

Unless someone can explain why the electorate has become much more inherently volatile over the last ten years, Blair and Brown’s achievement in keeping their foot on the Conservative’s political windpipe looks more and more impressive. From the perspective of 2008 there doesn’t seem there was anything inevitable about the situation in 1994 that would lead to Labour’s victory in 1997. It was Labour’s single minded determination to win and the Conservatives apparent death wish that turned an economic crisis into a political sea change.

Tony Blair’s tax pledge in 1996 was an important part of maintaining the contrast between a brilliant opposition and a hopeless Government. Today, as Alistair Darling reverses that pledge the balance of political forces is much more even.

Update: I'm on the World at One to talk about this

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