Raising the top rate of income tax, a second very good step - by Ken Livingstone

Further good news about today's economic package comes in briefings to the BBC, Financial Times, Guardian and other media that the top rate of income tax is to be raised to 45p in the pound for those earning over £150,000 a year.
Yesterday, in strongly welcoming the decision to cut VAT, I argued: 'this should be the beginning of a reshaping of the taxation system. It is being briefed that this reduction in VAT will be temporary, and it will then be restored to its previous level to reduce the budget deficit during an economic upturn. This is not what should occur - any increase in VAT would be deeply regressive for the reasons already outlined. Instead, when taxation increases again to reduce the budget deficit during an economic upturn, an increase in direct taxation on the highest incomes should take place. That is, any reduction in VAT should be used to begin a reshaping of the tax system in a more equitable direction.'
Clearly a rise in the top rate of income tax to 45p is therefore a step in the right direction. At present the fiscal arithmetic shows that it does not go far enough. This increase in income tax on the higher paid by itself will raise £2 billion, which would not by itself be sufficient to avoid the need to increase VAT as it becomes necessary to reduce the overall budget deficit during an economic upturn. An increase to 50p would have been better and the left must continue to argue that VAT must not be re-increased at a later date after the present cut.
But nevertheless the fact that for the first time direct taxation on the very highly paid is to be raised is a hugely symbolic, and important practical, step. It would be wrong at this stage to quibble and this measure increases the attractiveness of the economic package still further.
Reduction in VAT, and this increase in direct taxation on the high paid, are measures that are good for economic recovery and social justice and should be strongly supported by the left.
Note also how Labour's popularity has been transformed since it has been campaigning centrally on the economy, with measures that combine economic rationality with social justice, rather than making its central thrust being on attempting to appear right wing on crime and immigration. That must be a key lesson up to the general election. There is now a total dividing line with the Tories and their economically damaging and socially unjust policies. The party that sets the agenda has a key advantage in an election. Focusing on this economic divide is the agenda that can win Labour the election.

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