New Labour and inequality: Thatcherism continued?

Abstract

“From a political perspective, it is perhaps remarkable that it took Labour 12 years to introduce a new higher top rate of income tax. By creating a 50 per cent rate for income above £150,000, the government has effectively created a new social ‘cleavage’ at a point in the income spectrum that generates no political problems for it whatsoever (indeed, quite the opposite), but huge problems for its opponents. And in doing so it has transformed the politics of ‘the top rate of tax’. Indeed it is astonishing that the government struggled through a whole decade with the previous highest rate kicking in right in the middle of a vocal and electorally-sensitive group (upper-middle-class earners). Nothing could better symbolise the anxiety and acquiescence to the rules of previous Conservative governments that characterised New Labour in the late 1990s than turning in on itself about what it would or wouldn’t do to the existing top rate of tax, rather than realising that it didn’t have to accept this dilemma, and that with a bit of strategic restructuring it could have transformed the political calculus of the problem. It isn’t just the missed opportunities either, but the self-inflicted harm. Perhaps the worst way imaginable of structuring financial support for childcare was to create one system (the childcare element of the Working Tax Credit) for helping low-income households, and another (tax relief on childcare vouchers) primarily of importance to middle-income households. It’s the kind of thing you might have expected a mischievous right-wing government to have done had it deliberately set out to create a conundrum for the left.” (Horton & Gregory, 2009)