Income tax cut for top earners: political suicide for the Coalition?

‘Bafflement’ is the best word for the commentariat reaction to the suggestion that George Osborne will cut the top rate of income tax in this week’s budget.

Normally reliable admirers of the government’s political tactics are astonished that the Chancellor is planning the cut. In his Telegraph blog, Dan Hodges suggested the move would spell the end of Osborne’s career. The Express’s Patrick O’Flynn tweeted that it would be ‘political disaster for the Tories’.

Recent polls suggest they are absolutely right. From what we have heard so far, the change to the top rate seems on course to be extraordinarily unpopular.

The latest poll on the change, from YouGov, found that only 1 in 4 support a cut, with more than twice as many opposed (this asks about a cut to 40p rather than the likely 45p; I doubt that would make much difference). But this only begins to touch on how politically difficult the cut would be.

It’s no surprise that the Lib Dems’ remaining supporters really don’t like the proposal, indicating problems for the Coalition ahead.

But what’s striking is that the plan doesn’t seem to have majority support even among Tory voters. The political justification that it would offer red meat for unloved Tory voters doesn’t appear to bear much weight:

In fact, a more detailed look at views of the plan suggests even bigger political problems for the government.

Support for the change is higher among younger people: the group least likely to vote at an election. Older people are most strongly opposed to the plan*:

Indeed, the electoral problem seems even greater when we look at geography. The Midlands is packed with key battleground constituencies – crucial for the Tories if they are to win a majority at the next election – yet has very little support for cutting the top rate:

By way of benchmark, it’s instructive to look at the reaction to a budget a decade ago, when Gordon Brown increased National Insurance contributions by 1p to boost NHS funding.

The situation was almost an exact mirror of the current one: in good economic times, a Chancellor put up an earnings-based tax. Now, in bad times, a Chancellor looks likely to cut a similar tax.

Brown should have had a harder time than Osborne: you would never expect tax cuts to be less popular than a tax hike. But public opinion to the two changes is almost diametrically opposed, with an ICM poll finding 76% support for the NI increase.

The key difference is that the 2002 NI increase won support as it was seen as forcing the majority to make a sacrifice for a common good. A similar argument could in principle be made for the income tax cut, on the basis that the majority must bear the cost of lower taxes for higher-earning wealth creators, in order to encourage growth. But it’s hard to see that many people currently buy this view.

If Osborne is to overcome the latent opposition to a tax cut this week, he badly needs to win that argument. As things stand and if the top rate is indeed cut, it’s hard to doubt that the Coalition has tough times ahead.

 

(*) The data for this and the next chart come from the three most recent YouGov polls to include the question, in order to increase base sizes for the sub-groups. The full data for the previous polls are available here and here.

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