Andrew Grice: Tax rise is a repudiation of New Labour

Peter Mandelson, one of New Labour's architects, memorably said that it was "intensely relaxed about people getting filthy rich". Yesterday, after the Cabinet was briefed on Alistair Darling's plan to raise the top rate of income tax for people earning £150,000 a year, Lord Mandelson told the meeting: "In the sweep of history, this will not be seen as the tectonic plates shifting."

Nevertheless, the surprise move is a pivotal moment. For years, tax was such a toxic issue for New Labour that anyone daring to raise it in public was sent to the party's equivalent of Siberia.

Yesterday's surprise announcement that Labour will raise the top rate from 40p to 45p in the pound if it wins the next election marks a sea change for New Labour. Only a few months ago, when some ministers suggested privately that high earners should pay more tax, one Blairite cabinet member told me it would be "electoral suicide".

What's changed? A lot, ministers say. The looming recession has knocked such a black hole in the Government's coffers that it had to start saying how it would fill it. The banking bailout and City bonuses mean the public will probably welcome fat cats paying their "fair share" at a time when the whole nation has to make sacrifices.

Every Labour manifesto since 1997 has reiterated the party's pledge not to raise the basic or top tax rates. But Brown allies insisted that New Labour's fundamental tenet was never about specific rates, but economic stability. "Circumstances have changed, so the policies must too," one said.

Lord Mandelson, the Business Secretary, told yesterday's cabinet session that the mini-Budget fulfils New Labour's four key principles: markets where possible, governments where necessary; boldness; fairness and ensuring the country lived within its means.

Mr Brown, Lord Mandelson and Tony Blair were scarred by the 1992 election, when John Smith's Labour published a "shadow Budget" proposing tax rises to fund an increase in child benefit and pensions that damaged the party's prospects.

But the debate over the top rate was always more nuanced. Mr Brown, then shadow Chancellor, favoured a 50p top rate on incomes over £100,000 in the run-up to the 1997 election, but the plan was vetoed by Mr Blair. Few Labour folk expected Mr Brown to revisit it. As Chancellor, he argued that a 50p rate was not worth the candle.

Chancellor Brown pursued "redistribution by stealth", channelling money to the working poor through his complex tax credits. But in 2002, he raised national insurance payments by 1 per cent to boost the health budget. It proved popular – although the public mood has reversed since.

The tax U-turn will be welcomed by many Labour MPs. The left-winger Jon Cruddas said: "This should be the first stage in rebalancing the tax system so it's fairer for middle and low-income earners, as well as kick-starting the economy in the short term."

The move poses an acute dilemma for David Cameron, who wants to make Labour's temporary tax cuts permanent but will look as though he is defending the rich if he opposes higher taxes for top earners.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA celebration of British elections
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

SThree: Trainee Recruitment Consultant - Dublin

£13676.46 - £16411.61 per annum + OTE: SThree: SThree Trainee Recruitment Cons...

Ashdown Group: Marketing or Business Graduate Opportunity - Norwich - £22,000

£18000 - £22000 per annum + training: Ashdown Group: Business and Marketing Gr...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + Commission: SThree: Are you great at building rela...

Ashdown Group: Database Analyst - Birmingham - £22,000 plus benefits

£20000 - £22000 per annum + excellent benefits: Ashdown Group: Application Sup...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before