The Right Spot

Although she is wrong about the EU (the people who will decide these things in the next Parliament aren't; in fact, the Commission openly dreads a Labour victory in 2015), Polly Toynbee writes:

If it's not hurting, it's not working. The pain is a price worth paying, so said Tory chancellor Norman Lamont once, intensely relaxed about hurting those at the bottom.

Labour should enjoy the same relish at pained squeals of the top 1% who call themselves "business". Every yelp and yowl shows a 50p rise in top tax hits the right spot.

Guardian readers may have missed some howling: 24 captains of industry wrote to the Telegraph claiming the tax rise will "have the effect of discouraging business investment in Britain" and put the "recovery at risk and would very quickly lead to the loss of jobs".

The Times calls it "downright perverse". The Mail calls it "sheer economic vandalism", "aiming an arrow at the heart of enterprise" and damaging "business people from the smallest corner shop to the biggest corporations". (Really? A corner shop owner on £150,0000 a year?)

Only the Mirror says "most people would gladly pay 50p income tax in return for a salary topping £3,000 a week".

Indeed, most people do agree: a Survation/Mail poll finds 60% of voters – even a majority of Tories – support raising tax on the richest.

Boris Johnson in the Telegraph calls for the government to cut the rate to 40p to "open up more blue water". Bring it on, Labour should hope. This government's most self-harming act was that top tax cut.

What everyone can hear, loud as a burglar alarm, is the shriek of self-interest dressed up as national interest. 

The astronomical rise of super-earnings among a few top earners, very few of them real entrepreneurs, damages every aspect of British life.

Shareholders, the good governance of companies and even the future functioning of capitalism is put at risk by this swelling kleptocracy, unchecked by anyone.

The New Statesman revealed that the 24 writers to the Telegraph between them contributed £776,111 to the Tories. Virtually all big business always has and always will support the Tories, for this one reason: more money for them personally.

If a Labour win looks inevitable, a few offer grudging acquiescence, but it took maximum schmoozing with Tony Blair and Peter Mandelson's authentic worship of wealth.

If highly paid executives sincerely guarded their companies' interests, they would flock to Labour to repel a Tory party putting British business in jeopardy by risking withdrawal from the EU.

The CBI may argue for staying in Europe, but you can bet their members will still finance and vocally support the Tories because they will put their personal incomes well ahead of their companies' wellbeing or Britain's economic future.

These are custodians not of British business, but of their own usually unmerited fortunes.

Let's quickly dismiss their threats and warnings.

Will leading businesses flee – not because companies face a tax rise, but because their executives must pay more? All the evidence says no, according to the High Pay Centre.

Higher tax doesn't make executives uproot their families, not even from one US state to another. Less than 1% of leading global business has lured a CEO from a rival with extra pay.

Nor is there a tiny talent pool of suitable CEOs: these leaders are not irreplaceable.

What's more, companies whose top executives are paid many multiples more than their lower-paid staff suffer the most strikes and high staff turnover.

Skyrocketing pay shows no correlation with companies' improved performance either: these are the real something-for-nothing takers. But humans take what they can when no one stops them.

Johnson dusts down the old Laffer curve – a long discredited theory convenient for the rich, suggesting lower tax brings in more revenue.

But the IMF – no lefties – studying revenue-maximising rates finds virtually all countries could raise top rates considerably higher and bring in significant extra sums: the UK and the rest could raise their rates to an optimal 60% or more before they lose more than they gain.

The New Palgrave Dictionary of Economics, reviewing all the research, finds Laffer doesn't kick in until about 75%. But don't expect Laffer to disappear from the lexicon of bad reasons why the rich should pay less.

Much-quoted recent research by Emmanuel Saez and Thomas Piketty shows countries that cut their top rates had more sluggish growth: it stimulated worthless rent-seeking, not enterprise.

The argument will rage on about how much a 50p rate brings in: a Labour government will need every penny. 

But the real reward from this popular gesture is the chance to open a national debate on what's happening to wealth and incomes.

Ed Miliband calls for "predistribution" to redress falling low pay with a living wage, relying less on tax and benefits to paper over this great economic failure.

Now he can show how GDP growth sucking upwards to a top few is just as unsustainable. The rich need "predistribution" too, curbing their pay, relying less on tax to redirect it downwards.

This row helps Labour make sure voters understand the high pay/low pay crisis.

Polls show how little people know about pay scales and where they stand, how little they realise that top and bottom are tearing apart as the social fabric stretches to breaking.

As fourth most unequal of all 34 Organisation for Economic Co-operation and Development (OECD) countries, in the past 30 years the UK's top 1% has moved from taking 6% to 14% of national income, while middle to low wages fell.

People wildly underestimate the growing gap: rich and poor alike think they are more middling than they are. 

The top fifth takes 60% of income, the bottom fifth a hundred times less. As growth resumes, this is the time to ask how it should be shared.

How do you turn this into politics?

No two people will agree on exactly what's "fair": most think a measure of inequality is essential.

But once presented with the frightening trajectory showing how much worse this will get, people right across the political spectrum take fright. Labour's first message should be: don't let inequality get any worse.

Just holding it steady will be immensely hard: Labour's 13 years raised a million children and a million pensioners from poverty, with tax credits and fairer tax – but even so, inequality still grew a little.

In hard times sharing more fairly feels more politically vital. The 50p tax rate helps, but above all it levers open a public conversation New Labour avoided.

Does Britain want to grow ever more socially unjust?

Labour may still have ground to win on economic credibility but yesterday, when David Cameron said a 50p rate would be "very, very bad for the economy", he may find that defying it proves very, very bad for his party.