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Are the Tories for the left-behind towns, or the wealthy shires? We’ll soon find out | Polly Toynbee | Opinion

Did anyone expect triumphant Tories to take a leaf out of Jeremy Corbyn’s defeated manifesto? But there it is, leaked to the Financial Times and the Sunday Telegraph. Plans are (just possibly) afoot to raise fat sums from the rich to spend in the new Tory seats of the north. Yes, even reviving Ed Miliband’s £2bn mansion tax. Despite four abysmal election failures, might Labour yet claim significant ownership of radical new tax policies?

The 2019 Conservative manifesto was vague, but it pledged to limit “arbitrary tax advantages for the wealthiest in society”. If so, a phenomenal bonus for the many can be seized from the tax reliefs of the few. Over the years, crafty wealth managers made bogus promises to successive chancellors that tax reliefs would lead to booming productive investment: no sign of that, says the Institute for Fiscal Studies (IFS), which detects no gain from letting the wealthy pay less tax than their cleaners.

Pensions tax relief is being eyed up. It costs the state almost £40bn, and 40% of it goes to the top 10% – those earning £80,000 or more. The injustice is that an average earner (on £27,000) gets only 20p tax relief on each pension pound saved, but those on over £50,000 get 40p. Limiting everyone to 20% would save £10bn. As things stand, to them that hath, the Treasury gives more in one relief after another.

The Resolution Foundation questions the whole panoply of £155bn in tax reliefs. The government has already taken aim at “entrepreneurs” relief, which allows the wealthy who are selling their companies to pay just 10% instead of 20% in capital gains tax, costing taxpayers £2.7bn a year, to no good effect.

A reforming chancellor might question why, on someone’s death, their capital gains tax debt dies with them. But the FT suggests they might try even greater boldness – tightening inheritance tax itself, the most hated of taxes (“No taxation without respiration,” its opponents argue). Fabians and others long advocated replacing it with a lifetime gift tax to capture more unearned money passed to children, now avoided in trusts for the wealthiest.

As risky as the annual mansion tax proposal is a plan to raise top council tax bands – properties have not been revalued since 1991 – to stop the poor paying too much while the rich pay so little. Dare they? And dare they help the climate by raising petrol duties, frozen for 10 years?

You have to pinch yourself a good few times before believing the newly radicalised Tories are about to clean up Britain’s grossly unjust tax system. No names are attached to any of this, so who is kite-flying? The Treasury itself, say those in the know. The chancellor, Sajid Javid, is reported to be wary, as well he might be, but this sends a message of Treasury orthodoxy to the reckless would-be spendthrifts in No 10: no spending without raising taxes to pay for it.

Before the election, Boris Johnson strapped himself to an eye-watering fiscal rule to balance the budget within three years. This now regretted straitjacket was a political ploy to highlight Labour extravagance, but he’s stuck with it. Paul Johnson, the IFS director, says there is no room for more spending – he’s expecting bad news from the Office for Budget Responsibility ahead of the budget, similar to the Bank of England’s dismal prediction of only 1.1% growth for the next three post-Brexit years. Javid’s own forecast of 2.8% is a wild outlier. Here’s the unpalatable budget choice: no new spending, raise taxes on the rich or break your own fiscal rule just after setting it.

Look how wealth dashes to defend itself. Scrapping higher-rate pensions relief would be “fiscal hooliganism” screeches Hargreaves Lansdown, the wealth management company. The Daily Mail leader issues “a word of caution”. “By all means reward new Tory voters. But don’t alienate Middle England … If the electorate had wanted people taxed till the pips squeaked, they’d have backed Jeremy Corbyn.” To “threaten your core vote in the name of political posturing will only erode the goodwill so hard won in December.” The Mail always calls the top 10% “Middle England”, a trick to mislead aspiring members of the 90% into voting against their own interests.

The Sunday Telegraph thunders: “Tax increases are profoundly un-Conservative.” To touch inheritance tax would be “an assault on the family … once you’ve earned something it’s yours”.

The TaxPayers’ Alliance – which always backs rich taxpayers against ordinary PAYE workers – says “raids on property and other assets” are “a misunderstanding of what the new Tory voters were looking for … Levelling up doesn’t mean cutting other people down.” This is just the first Tory fissure between the awkwardly separate interests of left-behind towns and wealthy southern shires.

For a taste of what has happened to top wealth, Paul Johnson talks of this “second gilded age” of a massive accumulation of great fortunes. The top 1% is still soaring away from the rest, IFS research shows. In this most unequal country (in the EU, only Lithuania is worse), the inequality within that top 1% dwarfs all the rest. That explains why they are so outraged at any attempt to rein in their wealth: they feel poor compared to those far above them, that fine distinction not between have-yachts and have-nots, but the gap with the have-yachts-with-crews.

Entry to the top 1% starts at £120,000, but those on that income look up at the top 0.1% who earn £800,000 and well over. They huddle together, mostly in the south, with half inhabiting just 10% of constituencies. Little of their income is captured by income tax, they take it in lower-taxed capital gains from their businesses, dividends or professional partnerships. No accurate figures capture this top wealth, but 62% of capital gains tax is paid by those earning at least £1m a year in capital gains alone: that’s what “tax efficiency” yields. While they only pay 20%, PAYE earners pay 32% (20% income tax, 12% national insurance). Karen Rowlingson, a professor at the University of Birmingham, says this grotesque affluence damages social cohesion; the carbon footprints of the wealthy are monstrous; more unequal societies have lower growth rates; and these few exert ever greater power over governments.

As yet, we don’t know if this government has any guiding ideology. A Tory tug-of-war is on between populist spenders and traditional low-tax, low-spenders: the budget will reveal how the wind blows. If the spenders win, then there is the chance of fairer taxes. If they dare not tax their old friends, they can only appease their new voters by higher borrowing. There’s plenty of leeway for that. They could reclassify spending on education, training and social improvement as capital investment. Such radicalism would be far easier for a Tory government: where else can the rich, the Mail and the Telegraph turn?

More plausibly, Treasury orthodoxy will prevail: they will trim a little off some tax reliefs to buy a few cosmetic projects for the north, while the richest in the south keep their firm grip on all they have and hold.

Polly Toynbee is a Guardian columnist

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