If some New Labour MPs are suddenly concerned about how Gordon Brown’s tax changes benefit the well off at the expense of low earners, it is not because for the most part they have suddenly developed a political conscience. Their real worry - panic is probably a better expression - is about whether they can retain their seats, along with their comfortable, expenses-paid, two-house, lifestyle, at the next general election.
After all, the Institute for Fiscal Studies (IFS) showed in March 2007, over a year ago, at the time of Brown’s last budget as chancellor, what the impact of the abolition of the 10p income tax rate would be. Overall, 20% of taxpayers – five million people - would lose, 40% would be unaffected and another 40% would gain, said the IFS. The main losers would be single adults on £18,000 a year or less, with no children and not on tax credits. Families with two earners whose tax credit rise was not sufficient to compensate for income tax losses would also be worse off as would taxpaying women aged 60-64. Those earning £18,500 and £39,000 were set to gain.
So where have the brave New Labour MPs been all this time? Why did they only speak up a few days before the tax changes actually came into effect on Monday? Those who sit on the Treasury select committee heard evidence about the impact of the tax change some time ago. This week, the committee finally published a report saying that low wage earners were an "unreasonable target for raising additional tax revenues". The government doesn’t give a hoot about their bleating, however, and business secretary John Hutton quickly said that the changes would not be abandoned.
While the government can stump up billions to help failed banks like Northern Rock, it is not particularly concerned about poorer families. They have to make do with complicated, means-tested “tax credits”, which have proved an absolute failure in terms of their impact. In fact, the government is reclaiming money paid out in error, which people have already spent.
Poorer households are also hit hardest by the increases in food, travel and utility bills now running through the economy. Pensioner groups said a rise in winter fuel payments would do little to offset raised utility bills and council tax. The Civil Service Pensioners' Alliance, and National Federation of Royal Mail & BT Pensioners, said over the weekend that people aged 60-65 would be badly affected, including more than 600,000 female pensioners.
New Labour MPs have a right to be concerned – about their future that is. Three weeks before the local elections in May, a Sunday Telegraph/ICM opinion poll showed Labour on 32% and the Lib Dems on 18%, each trailing behind the Tories' 43%. This is enough to give the Tories an overall majority in a general election. In London, Tory right-winger Boris Johnson is ahead of Ken Livingstone in the race for Mayor.
Meanwhile, the housing crisis is gathering pace. Prices are falling at their sharpest since 1992 and Abbey today became the last bank to abandon 100% mortgages. Millions face steep rises in repayments as cheaper starter mortgages come up for re-financing while others who used rising house prices to borrow and spend against the value of their home are no longer able to do so. These are just some of the signs of market failure on a global scale, failures that look certain to destroy the fortunes of the capitalist New Labour government as well.
AWTW communications editor