Coffee House

Miliband’s false ‘millionaires’ tax cut’ attack

27 November 2012

9:18 PM

27 November 2012

9:18 PM

Messrs Miliband and Balls performed their pre-autumn statement double act today. If for some inexplicable reason you missed it, the Labour chiefs launched their Q&A with an attack on the government for its decision to cut 50p income tax rate to 45p:

‘The Government is about to give an average of £107,500 each to 8,000 people earning over a million a year. Not £40,000, but £107,500. To 8,000 millionaires. David Cameron and George Osborne are giving them this money. But it’s coming from you.

‘You are paying the price of their failure and them standing up for the wrong people. David Cameron and George Osborne believe the only way to persuade millionaires to make work harder is to give them more money. But they also seem to believe that the only way to make you work harder is to take money away. Cut your tax credits, squeeze your living standards, get rid of some of the services on which you rely, and put up VAT.

‘That’s where the money is coming from for the millionaires’ tax cut.’

It’s a powerful attack, but unfortunately for the two Eds, it just isn’t true. HMRC produced a thorough analysis of the 50p rate for the last Budget, and put the cost of cutting it to 45p at £100 million a year (Table A2 of the document). And that’s before you take into account the effect on indirect taxes (for example, if someone pays less income tax, they might spend more and hence pay more VAT). HMRC reckoned the cut to 45p would boost indirect tax receipts by around £130 million a year. Overall then, by HMRC’s analysis, cutting the 50p rate to 45p costs nothing at all — and might even save the Treasury around £30 million a year.

So where’s the money coming from for ‘the millionaires’ tax cut’? Not from tax credits, cuts or the VAT hike as Miliband claims. It’s coming from the millionaires’ tax cut.

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Show comments
  • John Fry

    Reading right through The Crunge’s responses to others, it’s just vile vitriol. What’s the point

  • John Fry

    Fascinating, If Millionaires get tax cuts they spend the money and pay VAT but if governments take it apparently the money simply disappears in to the air and never incurs tax again. The disingenuous of this piece is beyond belief.

  • no

    what a fucking dick head

  • JP

    Labour propaganda to feed the mob.

  • Watcher

    How do you Know they are lying?…Easy, socialists with moving lips.
    But, if a tax hike raised total tax-take why did Brown, after thirteen years in charge of the |Trteasury, leave it until he was certain he was about to lose the election? He was borrowing massively to pay the current account(Labour client bribes) so increased income would have been preferable. Unless of course he was sowing the fields with salt out of hatred for the Opposition,deliberately bequething them with generations of debt..

  • CaptainDallas

    I think Miliband’s an opportunistic simpleton, but it’s actually hard to argue with ‘[they] believe the only way to persuade
    millionaires to make work harder is to give them more money. But they
    also seem to believe that the only way to make you work harder is to
    take money away’.

    A self-inflicted wound by the idiotic government of chums.

  • Q46

    So let me get this straight. If a mugger does not attack me and take the £50 I have in my wallet nor my mobile phone, he has in fact given me £50 and a mobile phone.

    My question is, what spending cuts has he made to pay for this?

    • robertsonjames


  • Steven Brewster

    “HMRC reckoned the cut to 45p would boost indirect tax receipts by around £130 million a year.”
    Reckoned as in worked it out or “guestimated”?
    Personally I wouldn’t have thought it that likely that people earning such fantastic sums of money would necessarily be spending the extra cash they’d get from such a tax cut. More likely that it would sit in their bank account.

  • Chris lancashire

    This nasty, divisive, class-based politics promoting the politics of envy is one of the most unpleasant facets on MilliBalls. Let’s have a fight on the basis of policies? Nah, much better to lie and smear.

  • maurice12brady

    Speccy now joins the fantasy forecast business?

    • AnotherDaveB

      The 50% tax rate raised less revenue than the 40% tax rate.

      “…the introduction of the 50p rate of income tax caused two thirds of those earning over a million pounds per year to simply disappear from the reach of HM Revenue and Customs. Whereas, under the previous highest tax level of 40p in the pound, 16,000 people were prepared to declare earnings of one million, that number shrank to only 6,000 after Gordon Brown, bless him, introduced the higher rate. Result: the Treasury actually lost 7 billion pounds in revenue.”

      • Richard

        No doubt I’m revealing my moral innocence, but it puzzles me why people who are so rich, lucky and blessed don’t WANT to make a larger contribution. What has happened to the idea of the social conscience of the very wealthy? Did Thatcherism abolish it? Everyone now seems to take it for granted that most of them will want to leave or resort to arcane accountancy in order to avoid a small tax increase. What moral view should we take of that, when people who are so much poorer are facing cuts, wage freezes, lower pensions and job insecurity? Don’t these millionaires have any shame?

        • romanlee

          No doubt I’m revealing my moral innocence.

          No you are revealing your moral ignorance, it is nothing to do with Thatcher but everything to do with Blair, Brown and Balls who while in power sucked up to the rich and at the same time financed this largesse from day one by screwing as much as they could out of the pensions of mainly private pensions of the less well off turning them into poor pensioners requiring supplementary top ups from the government, all the while they were hiking up the wages and pensions of middle and upper earners in the public sector with unearned money borrowed from far and wide.

          Now the poor have to pay because there are a lot more poor than rich and if you took everything of the rich within a year all you would have is more poor and no rich.

          • Richard

            I don’t think this at all addresses what I said. I wasn’t suggesting taking ‘everything’ from the rich, and I quite agree that Blair and Brown as well as Thatcher are to blame for this strange moral vacancy. What I was asking was why the rich themselves don’t feel that they OUGHT to contribute a little bit more, considering that they are so lucky and privileged.

            • Fergus Pickering

              They don’t feel they ought to because they feel that their riches show their virtue. And that has always been so. They don’t consider it luck or privilege but simply their just deserts. Anyway, how generous are YOU? How much do you give to the poor? You may say you are not rich, but you are, you know. Most people are MUCH poorer than you. Do you give away half? Why not? I don’t give money away, but then I am just an ordinary sinner whereas you are obviously a pillar of virtue. So, do you give away half?

              • Richard

                I’m an ordinary sinner too, and by world standards nearly all of us are rich in this country, yes: these are fair points. But we’re not talking about giving away half. We’re talking about a difference of five or ten percent that only begins after the first £150,000. That is to say, it only begins once your income is about seven times as much as the average. And these people seriously begrudge this, at a time when poorer people are losing so much more? It’s human to grumble about it, I’m sure, but to begrudge it to the extent of leaving the country that has given them so much? Why don’t we at least have a public moral vocabulary that calls this attitude shameful?

            • AnotherDaveB
              • Richard

                Disproportionate to what?

                • AnotherDaveB

                  To their numbers, or their earnings.

                  How high does tax have to be for you to be satisfied that ‘the rich’ are ‘contributing’ enough? Is there an upper limit?

                • Richard

                  If we’re comparing an individual on one of the top incomes to someone on an ordinary income, it doesn’t seem disproportionate to me that the top income person should accept a small tax increase during our present difficulties.

                • AnotherDaveB

                  1.”Our present difficulties”, HMG budget deficit, is caused by overspending, not under-taxing. High taxes also have a negative effect on economic growth.

                  2. increasing the income tax rate from 40%> 50% is not a “small tax increase”.

                • Richard

                  2. increasing the income tax rate from 40%> 50% is not a “small tax increase”.
                  It is when the threshold is £150,000.

        • Fergs Pickering

          You mean they were different before? I don’t think so, old fruit. The rich don’t get rich by giving it away and they have always been notoriously mean. Do you remember Paul Getty who had a pay phone for guests in his house? And Bernard Shaw was very mean in his payments to staff.

        • AnotherDaveB

          1. It’s not a small tax increase.

          2.”What has happened to the idea of the social conscience of the very wealthy? ”

          As government expands, civil society contracts. So you could say that it is government policy to eradicate social capital.

  • Herp Derp

    “David Cameron and George Osborne are giving them this money.” Do they not understand what tax is? Dave and George don’t give me the money they decide not to take in tax. ITS MY MONEY

  • Mick Cane

    How on earth can a tax cut of 100 million generate extra tax of 130million? Don’t be so bloody stupid.

    • HooksLaw

      You want educating do you? The HMRC sudy reported,
      ‘…the introduction of the 50 per cent additional rate is estimated
      to have reduced indirect tax receipts by around £220 million per annum.
      Using the same assumptions and methodology, the reduction of the rate to 45 per cent is estimated to increase indirect tax receipts by around £130 million per annum.’

      For this reason the CEBR (Centre for Economic and Business Research) have said that the optimum top rate would be 36p.
      In summary it says,
      ‘Whilst well-intentioned, advocates of 50p tax are likely to cost the Treasury a significant amount of money in lost income over the coming years.
      As popular as the 50% rate of Income Tax may be among the electorate at present, the analysis in this report suggests that the economic impact is likely to be negative – leading to a loss of tax revenue in addition to deterring entrepreneurship and hard work.’

      I wonder if Ed and Ed read it? Lets face it they were happy with the top rate at 40p for 13 years

    • Fergus Pickering

      It is not bloody stupid. Have you never heard of the Laffer curve? If you cut tax by 5p in the pound (that’s your £100 million) and that has the result that many thousands of people pay tax (by no longer dodging it, by paying tax here rather than in Switzerland, by simply earning more money) then the additional revenue might well be £130 million. No economist, not even the egregious Blanchflower) doubts that the Laffer curve (popularised by President Reagan) exists. There is disagreement about when it kicks in, so that a rise in tax rate means a fall in revenue. You can probably see that raising income tax to 90p in the pound will be most unlikely to raise revenue because it drives the likes of the Beatles and the Burtons to live abroad. It is simply propaganda. Got it. Don’t mention it. I try to spread sweetness and light.

    • Colonel Mustard

      The Labour Party’s grasp of economics in two sentences. Thus is demonstrated why “the money is all gone”.

  • R2-D2

    I was under the impression that the top tax rate is 5p higher than it was when the Eds were in government.

    • Fergus Pickering

      Broon shoved the tax up the day before he left office, or something like that. You have to understand the mindset. A Tory government is such an intrinsically wicked thing that any lie, any misrepresentation, is justified if it upsets this crime against humanity.

      • Noa

        Ah Fergus. Is this a Tory government? Really? The coalition doesn’t look like one that I’ve ever seen before. But, if you think it is, it’s probably all right for you.

  • DavidDP

    That’s not why it’s not true though. It is not true because they are not taking money from people to give it to the rich, they are simply not taking the rich’s money. Now, it’s perfectly possible to disagree with this, but to do say by saying what they have said either suggests they believe the e money people earn belongs to the State in its entirety and is given to them through not taxing them, or they are lying mendaciously. Either way, they do not deserve to be trusted with the money they do take from people.

    • Fergus Pickering

      Lying mendaciously? How do you lie any other way?

  • Saddo

    Rather sad, given his family history, that Ed uses Goebbels Big Lie strategy on this, time after time

    • HooksLaw

      Hang on, he’s a socialist!

  • CJ

    What a pair of muppets.

    How can you give someone their own money? Unless, of course, you already believe that all earnings belong to the state.

    • telemachus

      You miss the point
      You screw down salaries for the poor then hike up VAT being a flat tax having a disproportionate effect on the poor and you withdraw welfare benefits
      Then you make the crass decision to give a 5% pay rise for the rich
      If that is not decisive what is
      Balls and Miliband are the true heirs to One Nationhood

      • DavidDP

        There was no decision to give any sort of pay rise to the rich. None whatsoever. Because, and this is what you seem to dont understand-not taking the money people earn away from them is not a pay rise. And, it seems neither do the two Eds. Disraeli would have understood this and would be horrified at the claim that taxing people less is giving the a pay rise, given the implication that would have via a vid the State and people’s private earnings. True heirs to One Nationhood? True heirs to Marx more like.

      • Capilano

        Oh look tm evades the point again. Shocker.

      • Colonel Mustard

        That just shows nasty little socialists like you believe that the money people earn through their own work belongs to the state. This whole business of “signing cheques” or giving millionaires a “pay rise” is one of Goebbels big lies. You people are the reincarnated NSDAP in each and every way. Truly grim.

        One Nation. One People. One Labour Party.

        Sick. Expect resistance.

      • Julian F

        If someone earning £1000,000 is taxed at a marginal rate of 50% on income over £150,000 and that rate is then reduced to 45%, the increase in their take-home (of money which is already their own, by the way) is 4,25%, not 5%. Maths dyslexia too, is it? You poor thing,

      • Nick Kaplan

        If that was the point then why not say it like that. Why dress it up in the lie that the government is GIVING money to millionaires rather than NOT TAKING quite such an astonishing proportion? Is Milliband really so rabidly left wing that he cannot comprehend the difference between a tax-cut and a government hand-out, can he not grasp the difference between giving and not taking?
        His/ your argument may be more powerful if he didn’t feel the need to be dishonest about it.

        • The Crunge

          In answer to your question: yes he is. I love watching a bit of hypocrisy though with the two Eds looking as if butter would not melt while viscerally hating each others guts,

      • The Crunge

        No as always you miss the point. A 40% tax rate had 16,000 people declaring an income of £1 million plus while the 50% rate has 6,000 people declaring such an income. This equates to a loss to the treasury of £7 Billion so by raising the tax rate Brown/Balls actually added to the structural deficit. As Mr Jones points out, the cut to 45% will probably be self-financing. That said, I do not suspect that anything so mundane as the truth will alter your ludicrous and illiterately expressed opinions.

      • HJ777

        Hasn’t the government raised personal tax allowances which has a disproportionately beneficial effect on the take home salaries of the lowest paid?

        You seem to have forgotten about that.

        It’s certainly better than doubling the lowest rate of income tax as Brown did.

  • Colonel Mustard

    The creed of the Labour Party:-

    “A lie can travel half way around the world while the truth is still putting on its boots.”

    “If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”

    “New Labour is nothing less than the political wing of the British people as a whole.”

    “Im Sommer 1934 war der Gleichschaltungsprozess durch Übernahme der wichtigsten Verbände in die Organisationsstruktur der NSDAP weit fortgeschritten. Die erzwungene und freiwillige Anpassung ermöglichte der Partei eine nahezu vollständige Kontrolle aller gesellschaftlichen Bereiche. Gleichgeschaltet waren neben Vereinen und Organisationen auch Presse, Film und Rundfunk, die als Mittel zur Beeinflussung eingesetzt wurden. Lediglich in den beiden großen Kirchen stieß die rücksichtslose Gleichschaltung mit Beginn des “Kirchenkampfs” zum Teil auf ein erhebliches Widerstandspotential.”

  • MGR

    Someone needs to work out how much Messrs M & B benefit personally and ask whether they are handing it back to HMRC.

    • 2trueblue

      How many times did Balls/Cooper flip their houses making a whacking tax free gain for their household.

  • anyfool

    Lies travel faster than the truth, that is something these two understand and because they do not have a scruple between themselves they do it daily.

    • 2trueblue

      And the BBC broadcast it unchallenged.

    • George_Arseborne

      5% cuts for millionaire is proportionate to pay rise for the rich. Telemachus is spot on by analysing the fact that low income earners got pay freeze, hike VAT, benefit slashed. How dare you say the Magnificient Eds are telling lies. The truth is in the ballot box 2015 when we will kick out those two arrogant posh boys who does not know the price of a pint of milk. Get real guys.

      • The Crunge

        You seem to want to replace “two arrogant posh boys” with….”Two very arrogant and very dishonest posh boys”. Why it should be that speaking properly and receiving a decent education must debar anybody from public office is difficult to understand beyond the confines of feverish left-wing paranoia. As Mr Jones argues, the proposed cut will paradoxically probably produce higher tax revenues from the 1% of the population that already pays nearly 30% of all income taxes (Office of National Statistics, 2012). VAT is not chargable on food and clothing and these are the principle expenditures of those on lower incomes. Consequently, the arguments of Telemachus are, as usual, ill considered, without supporting evidence and economically incorrect. Nobody is getting a pay rise through the tax system as the two Ed’s well know, they are simply being allowed to keep more of their own money. They will, in all likelihood, spend that money far more efficiently than a careless and rapacious state. By the way, your penultimate sentence is both illiterate and incorrect.

        • DavidDP

          “How dare you say the Magnificient Eds are telling lies. ”
          Because they are. Simples.
          Either that, or they really do believe that the money I earn is 100% the property of the State, and they pay me by deciding how much not to confiscate.

          • The Crunge

            I think you should respond to George Arseborne. If you read my post I think you will find that I am endorsing your views albeit in a lengthier manner. I think that even two people as dishonest as the two Eds realise it is our money they just choose to ignore that fact for their own selfish and spiteful ends.

      • HJ777

        “low earners got pay freeze”?

        What does this mean? Most low earners aren’t employed by government so the only way it can decide any of their pay is via the minimum wage – which has just gone up.

        The government has also increased income tax allowances and the lowest paid are proportionately the biggest gainers.