Labour tax-raising agenda - the agenda that 'dare not speak its name'
The Labour Leader of the House of Commons (and part-time Welsh Secretary) will this evening give a speech, widely trailed in the media, asking whether raising the top tax rate for those on higher incomes should be considered as a way of allowing those presently caught by the existing 40% top rate to be exempted by raising the threshold for that level of tax. In a BBC Radio4 Today programme interview this morming Peter Hain (see profile) defended his thoughts, whilst confirming that going back to the 'punitive' (98%) rates imposed by previous Labour administrations was 'out of the question'.
The Treasury and Tony Blair (currently in Greece for an EU summit) have reacted angrily to Mr Hain's ideas, saying: "it is Chancellor Gordon Brown who makes decisions on taxation".
In the six years of this Labour Government there have already been large increases in taxation and/or diminution of allowances, to fund a major resdistribution of resources to the state supported sector. Most recently National Insurance (NI) contributions have been raised by 1% (effectively a 10% raise on the current level of that 'tax') and soon after Labour came to power in 1997 the relief on tax for pension contributions was abolished.
The effects of these policies?
- it seems that the effect of the NI contributions raise was not fully factored in when agreeing budgets for the education sector so that despite the much publicised increases in funding many schools throughout the country are having to let go teachers to meet their budget targets.
- the abolition of tax relief on pension contributions in 1997 seems to be a major factor in why many company pension schemes have become so heavily underfunded and why many have been terminated, not just for new employees but in some cases for existing employees, too.
It is obviously highly-embarrassing for the Labour Government that its true agenda has dared to peep into view with Mr Hain floating the idea of raising direct taxation - hence the strong reaction from the Treasury dismissing his ideas, but it is highly-unlikely (in the view of the commentators I have heard today) that Mr Hain would float these ideas without the approval of Downing Street - whether of No 10 or No 11 is moot. Mr Brown has seemingly been very successful in managing the economy sice he became Chancellor in 1997, but that 'seemingly' hides a lot of detail which has begun seriously to affect the economy in a negative manner - for the last year I have been reading analyses of the government's funding and spending programmes and it has been almost universally speculated that tax raises would at some stage become necessary to pay for the spending levels outlined in his Budgets - it seems to me that Mr Hain has revealed what is really going on, probably with the tacit support of certain senior members of the government (Mr Blair?) as a way of exposing the flaws in bitter rival Mr Brown's macro-economics.
