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Henry G Manson on the Wealth Tax

August 31st, 2012

Henry G Manson asks could Clegg’s wealth tax cause trouble for rival parties?

It would be easy to dismiss Nick Clegg’s demand for a new emergency tax on the wealthy as a gimmick that won’t last longer than the soggy sausage rolls of his party conference. Very easy.

The detail isn’t there, his party’s spokesmen are unaware of the what it involves yet and there is the uncomfortable fact that the he signed up to the cut in the top rate of income tax for those on £125,000 per year or more a matter of months ago. But to look no further than this risks missing the dangers for Clegg’s rivals who have so far roundly mocked the idea.

The threat for the Tories is immediate. In opposing any form of wealth tax they instantly reinforce perceptions of themselves as the party of the rich. Backbencher Bernard Jenkin was first out of the traps insisting “we’ve seen a lot of hedge funds moving abroad because of the tax system in this country. We’ve got to be very careful we don’t strangle the goose that lays the golden egg.”

Equating hedge funds as the national interest is in itself a risky move. It’s certainly not an industry the man on the street identifies with and feels warm towards. How many more will follow this line?

The Adam Smith Institute has also piled in  saying that not only are wealth taxes counterproductive they are also ‘immoral’. When the majority of people are having living standards squeezed it is understandable why the public want the rich to pay more tax. There are a few booby traps for the Conservative Party in this territory, not least given the background of their funders.

Meanwhile Labour’s top brass have sneered at Clegg’s proposal saying “Clegg thinks by calling for a mansion tax, people will forget he gave a tax cut of over £40K to many thousands of millionaires. Well we won’t.”

They’re right to highlight his support for cutting the top rate of income tax. That’s fair game. However if the Jimmy Carr carry-on showed one thing it is how little ‘income’ wealthy people declare in the first place regardless of the tax rate.

What if the Lib Dem leader proposes something bolder and far-reaching that shows signs of taking off? While Shadow Ministers might be happy taking pot-shots at Lib Dems, there will be others on the centre-left who welcome the move and debate. The New Statesman says Nick Clegg ‘deserves a fair hearing’  and there will be others too.

There is bound to be some pressure on Labour’s leadership from the grassroots on the issue of wealth taxes. Labour’s party members and the trade unions will welcome the richest paying a greater share and want Labour to be more robust and explicit on this. Ed Miliband has tried to break from ‘New Labour’ but there will be calls for more meat on the bone during the conference period.

It’s all well and good the frontbench arguing that Liberal Democrats shouldn’t have reduced the 50p tax rate, but it won’t be long before there is focus on their position and ‘what would you do?’

That isn’t clear yet and therefore is a tough line to hold when criticising your opponents on this issue.

I have no idea what will come of Nick Clegg’s wealth tax plans. Perhaps he doesn’t either. It certainly feels like the last throw of a dice for a leader under increasing pressure. But that’s not to say the Liberal Democrat leader can’t role a double six and outfox all his opponents on an issue the public will support him on.

Henry G Manson