James Frayne: Big tax rises would make Tory campaigning impossible – in Red Wall seats as well as traditionally blue ones

1 Sep

James Frayne is Director of Public First and author of Meet the People, a guide to moving public opinion.

In my last column, I suggested that the best hope for the Conservatives in building an effective campaign infrastructure in newly-won Northern and Midlands seats was by developing a new business-led coalition in these places.

Many of these towns and small cities have no activist networks of any description, and new voters come from families that openly despised the Tories a generation ago. Practically the only truly culturally Conservative people here – in the North East, the far North West and South Yorkshire – are businesspeople. Businesspeople are relatively large in number and are trusted by their local communities; they would be a perfect launchpad for a new Conservative Party.

It’s early days, of course, and details are yet to emerge, but news of a major assault on British businesses via higher taxes would make such a campaign totally impossible to run. It would be a massive set back to Conservative plans to become a regional party.

If reports are to be believed, amongst other things, the Treasury is considering significantly raising Corporation Tax, as well as Capital Gains Tax (CGT) and taxes on pension payments.

“Corporation Tax” is badly named; it’s a tax on pretty much any significant business, not on “corporations” – but, while larger businesses have both the resources and the endless budget lines to be able to minimise profit and keep corporation tax bills down, SMEs just have to lump it.

And increases in CGT and pension payments will put fear into small businesses, because they ultimately allow business owners to take a lower income now in the hope and expectation of being able to enjoy pay-offs in the future – with their currently lower income supporting their ability to employ others.

All of this would be a bad idea politically at the best of times. But doing it now, just when businesses have been struggling very badly, would be unbelievably risky. It’s not just high street retailers that have bit badly hit; vast numbers of firms have been hit either directly by the logistical difficulties of running a business while social distancing is required, or by a collapse in the confidence of their customers, or both.

New, higher taxes would make it harder for businesses to earn a living, and they would also make redundancies more likely and the scrapping of recruitment plans much more likely. Many businesses will be looking to develop a decent financial cushion over the next year or two – with at least six months’ operating costs in the bank – having been scarred by how close they came during lockdown to oblivion.

They would not be able to generate such a cushion with higher taxes on their profits. (Some businesses are also complaining that this comes on top of Brexit – something else that they would sooner not manage).

Aren’t these businesspeople effectively locked-in to the Conservative Party? Where would businesses go to vote? It’s true to say there are many, many businesspeople across the Midlands and North that would be very unlikely to vote Labour – on the basis the Conservatives would pretty much always be better for them.

But we’re not talking about simply securing their votes for future elections; we’re talking about trying to energise businesses so that they became local recruiters, fundraisers and campaigners for the Party in places where there are no activists. They simply won’t do this if the Conservatives turn them over. Again, if the businesspeople of Rotherham, Doncaster, Barrow, Workington, Bishop Auckland and so on aren’t going to create a new Conservative campaign network, who on earth is going to do it?

While major tax rises on business would make the growth of new regional Conservative Party much more difficult, I strongly doubt it would retain any medium-term popularity with the public either. Public opinion polls always lag behind business polls – and these are showing extreme concern about the state of the economy.

The public would catch up when reality bit and growth slowed and redundancies rose; at that point, the public would see that raising taxes on employers doesn’t help anyone. So where should the Treasury look? There are already suggestions they are being strongly encouraged to look at spending cuts first; only when they have exhausted what’s reasonable morally, economically and politically should they turn towards tax rises.

Anand Menon: Our latest research finds that the Conservatives are divided on economics, but united on culture.

30 Jun

Anand Menon is Director of the UK in a Changing Europe.

Dominic Cummings must be rubbing his hands with glee. As more and more questions are raised about what some are calling the ‘lethal amaterurism’ that has characterised the Government’s handling of the Covid-19 crisis, the country spent most of June distracted by furious arguments about race and statues.

This has moved the debate on from Boris Johnson’s chief advisor’s unique approach to optical health. More importantly, a debate about values rather than health outcomes suits the Government down to the ground.

The referendum of 2016 polarized the country along values lines (between social liberals and social conservatives) rather than along the left-right cleavage that traditionally structured political competition.

Source: British Election Study

Nor was this a one-off phenomenon. The values division laid bare by the referendum went on to shape the nature of subsequent electoral competition. Think back to last year’s election.

The fact that the Conservatives won seats like Wakefield, Bishop Auckland and Workington, or that they won by 21 per cent among working class voters is testimony to the realignment that had taken place in our politics.

So too is the fact that in seats where over 60 per cent backed leave, the Tories increased their support by an average of six per cent, whereas in those seats where more than 60 per cent voted Remain, the party’s vote actually fell by three points.

The argument over statues that has been such a central part of the Black Lives Matter protests in this country has mobilized that same division. And it is terrain on which the Conservatives are relatively well equipped to fight.

Recent work carried out by the UK in a Changing Europe compares the attitudes of MPs, party members and voters, by asking each group a series of questions about fundamental ideological attitudes. The findings are revealing.

When it comes to social values, the Conservative clan looks relatively united. Even more importantly, on values they are far closer to those crucial voters who switched from Labour in 2017 to the Conservatives in 2019 than to Keir Starmer’s party.

But when it comes to the politics of left versus right – questions like whether ‘there is one rule for the rich and one for the poor’, and the idea that ‘ordinary working people do not get their fair share of the nation’s wealth’ – the picture could hardly be more different.

Conservative MPs are to the right of both their own party members and Conservative voters, and significantly to the right of those 2019 Labour-to-Conservative switchers. Labour, on the other hand, is not just far less internally divided but considerably closer to those lost voters.

Looking forward, then, the Conservatives have an interest in maintaining a focus on values. Think of it this way. On the (feigned) threat to Churchill’s statue in Parliament Square, the Conservative Party spoke with one voice and rallied behind Boris Johnson. When it comes to the economic response to Covid-19, the party’s backbenches are increasingly restless.

The easing of lockdown will focus attention firmly on economic recovery. How these issues are framed then takes on crucial importance. We face another decade in which political life will be shaped by the impact of an economic crisis.

The Conservative narrative may well seek to major not on the details of the economic response – on how great the role of the state should be, or how we pay for ballooning deficits – but on arguably more ‘ephemeral’ concerns.

Conservative commentators are already queuing up to point out that it is surely no longer a priority to publish gender pay gaps, or to ‘suffer a little for the sake of the planet.’ Others argue that fads like the war on plastic have been made redundant by the virus.

It seems Number 10 is, in the short term, planning a number of ways of triggering values divisions. The Sunday Times reported that the Government is planning to scrap plans to allow people to change their legal gender.

Other reports suggest that some in Downing Street are encouraging the Prime Minister to launch a ‘war on woke’. The hope is clearly to profit from profound values divisions within Labour’s electoral coalition and detatch voters who might, if it really were all about the economy, stupid, support the centre-left rather than the centre-right.

For Labour, then, the key will be to find a way to nullify this strategy. Paul Mason has rightly argued that the party must focus on coming up with a more convincing narrative about reshaping the role of the state in the economy, as a means of uniting a coalition that has fractured over the last decade over values questions.

The party now has a leader that the public, including Leave voters, find broadly convincing – and one who is going to be less easy to label as an unpatriotic ultra-liberal.

A narrative about economic fairness unites Labour and has the potential to tap into the ideological attitudes of the median voter.

The Government’s current plans to emerge from lockdown will create millions of economic losers, and the Conservatives look set to incur significant governing costs.

A laser like-focus on the economy and on the steps needed both to recover from the post-lockdown slowdown in such a way as to tackle the numerous inequalities that the pandemic has highlighted could command broad support, not least among those voters that fled the party last year.

As the recent Labour Together review of the 2019 election concluded, Labour could win by building support for a ‘big change economic agenda’ that neutralises cultural and social tensions.

Whatever happens, the relative impact of the two cleavages – left vs right and social liberal vs social conservative will be crucial. The relative success of each side in imposing its own agenda on the political debate will help determine who ultimately triumphs.

This article is a cross-post from the UK in a Changing Europe’s website.

Read the Mind the values gap report here.