Labour and the Lib Dems can work together on wealth taxation

Nick Clegg has been in the news this week, rallying the troops ahead of the party conference season with his proposals for a wealth tax.

The Conservative response so far has been predictable, with George Osborne warning that taxing the rich too heavily would drive “wealth creators” overseas, and Tory backbencher Bernard Jenkin dismissing the proposal as the “politics of envy.”

But what of Labour’s response? So far, the Labour line has been to focus on Clegg’s hypocrisy – he, after all, backed a budget which is gifting top rate taxpayers an income tax cut – without commenting on the principles of a wealth tax.

No doubt Labour are worried about getting bogged down in “class war” rhetoric from the Tory side, even though – as I’ve already said in previous posts – the Tories are transparently engaging in a class war of their own. But the party should be bold enough to support the idea of a wealth tax, and mature enough to recognise areas where it can work with one of the coalition parties.

My Labour (and Labour Left) comrade Darrell Goodliffe puts a convincing case that Labour should not work too closely with the Liberal Democrats, certainly not until the results of the next general election are known; I see his point, but as Darrell concedes, in specific cases where the parties can come together, and it is politically possible to do so, we should not dismiss the possibility altogether.

In the case of a wealth tax, it would be a simple matter for a Labour MP to submit an amendment of this kind to the next budget’s Finance Bill – an amendment that, with the support of Labour and Liberal Democrat MPs, should have enough votes to clear the Commons (it should be possible to persuade the nationalist parties to at least abstain). Thus a wealth tax could be introduced without Tory support, which is not likely to be forthcoming.

One issue with this is the precise form a wealth tax would take, which would require a period of negotiation between the two parties. The Lib Dem proposal for a “mansion tax” (quietly canned just before the last budget) might be a reasonable starting point. How Tory MPs would react to their coalition partners openly negotiating with the Opposition might pose another stumbling block, but perhaps some of them could be brought to the negotiating table too, to engineer a solution acceptable to all parties, and which does not require too much parliamentary skullduggery to pass.

The other major problem is the usual one, when it comes to the Lib Dems, and Nick Clegg in particular – are they sincere? Or is this another phony Lib Dem “initiative,” like Lords reform and the pupil premium, which sounds good at conference time, but will end up going nowhere?

One thing is for certain, though – Labour won’t find out if they continue to sit on the sidelines, carping unnoticed while the coalition parties pretend to be Government and Opposition at the same time.

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