By Larry Elliott • August 27 2017

Denis Healey never actually said he intended to squeeze the rich until the pips squeaked. The man who would soon be Labour chancellor was referring solely to property speculators when he made the remark during the February 1974 election campaign.

But the rich knew full well that Healey was coming for them, too. At the previous year’s Labour party conference, he said: “We shall increase income tax on the better off so that we can help the hundreds of thousands of families now tangled helplessly in the poverty trap, by raising the tax threshold and introducing reduced rates of tax for those at the bottom of the ladder. I warn you, there are going to be howls of anguish from the rich. But before you cheer too loudly, let me warn you that a lot of you will pay extra taxes, too.”

Healey was as good as his word, with the top rate of income tax set at 83%. By contrast, the manifesto pledges outlined by John McDonnell, the current shadow chancellor, were modest. Under a Jeremy Corbyn government, someone earning around £125,000 or more would have been eligible for a new 50% income tax bracket and there would have been a 45% rate for people on more than £80,000.

Still, this is a different age. The abiding principle is that we should cut the rich some slack because the tax system needs them. Reducing tax rates for the better off is supposed to lead to a higher tax take by stimulating entrepreneurship and making the super-rich work harder. For those who don’t believe this neoliberal fairytale, there is a fall-back position: the top 1% pay a lot more than 1% of tax receipts – and the proportion has been rising. The top 1% of earners in the UK accounts for 27% of income tax receipts, more than double the percentage when Healey was at the Treasury. So, stop grumbling, we’re told. Without the sacrifices being made by those at the top, the cuts would be even deeper.

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