Ed Miliband backs 'mansion tax' to fund 10p tax rate return

 

Ed Miliband : "Labour is on the side of working people "

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A Labour government would seek to re-introduce the 10p starting rate of tax scrapped by Gordon Brown in 2008, Ed Miliband has announced in a speech.

Mr Miliband said it was a "very bad mistake" to get rid of it and the move would send a "clear signal" his party was on the "side of working people".

The move, worth about £2 a week for people, would be funded by a "mansion tax" on £2m properties, he said.

But No 10 said it was a "stunning admission of economic incompetence".

The decision to scrap the 10p tax band - announced in the 2007 Budget as part of a package which also saw the basic rate of tax reduced from 22p to 20p - was highly controversial.

Despite measures to compensate those affected, critics said up to 500,000 people were left worse off.

Mr Miliband said the move was "wrong" as the 10p tax rate made a difference to people on low incomes and increased incentives to work.

He said he was "determined to put it right" by reinstating the 10p rate after the next election and urged the government to consider doing it at next month's Budget, describing it as the "progressive choice".

'Fairer taxes'

"We would put right a mistake made by Gordon Brown and the last Labour government," he said.

"We would use the money raised by a mansion tax to reintroduce a lower 10 pence starting rate of tax, with the size of the band depending on the amount raised. This would benefit 25 million basic rate taxpayers."

HOW THE 10p RATE WORKED

  • Most people have a chunk of their income which is tax free - known as the personal allowance, In 2007, this was worth £5,225 and has since risen to £8,105.
  • Before April 2008, everyone paid 10p on the next £2,230 of their income, only rising to 22p above this level.
  • But after the 10p tax band was axed, everyone paid 20p on their earnings above the personal allowance until they hit the higher rate 40% band
  • In 2012-3, the 20% rate applies to the first £34,370 of income above the personal allowance

Labour has previously indicated it would only set out tax and spending commitments in the run-up to the next election - scheduled in 2015 - and Mr Miliband made it clear that he would not commit to put any specific policies in its manifesto at this stage.

But Mr Miliband said the 10p pledge would send a clear message about Labour's commitment "to a fairer tax system and improving the living standards of working people" as well as showing the party is "moving on from the past".

Shadow chancellor Ed Balls said both he and Ed Miliband had raised objections to the 10p move when they were members of the cabinet at the time.

Asked on the Daily Politics whether it was a firm manifesto commitment, Mr Balls said they could not write their manifesto now, but the changes were something "we want to do... intend to do... plan to do" if the party gets into power after the next election.

The idea of a mansion tax was first proposed by the Lib Dems before the last election although the Conservatives oppose the move and the policy was not adopted by the coalition government.

Mr Balls said there were about 70,000 homes currently worth more than £2m - half of which were second homes - and a tax could raise an estimated £2bn.

He said the detail "had to be got right" but he would be willing to talk to the Lib Dems who he suggested were "still keen" on the idea.

In the speech, Mr Miliband also repeated his support for a temporary cut in VAT to boost economic growth - and called for action on train fares, "unfair" bank charges and capping interest on payday loans.

'Never so good'

Criticising the government's economic policy as a "race to the bottom in wages and skills", he accused the Conservatives and Lib Dems of rewarding those at the top while "squeezing" everyone else.

Speaking in Bedford, where in 1957 Conservative Prime Minister Harold Macmillan famously said Britons had "never had it so good", the Labour leader said that falling wages and rising prices mean many now feel "they will never have it so good again".

Danny Alexander MP: "Strong case for an additional levy on the highest level properties"

"People in Britain are putting in the hours - doing the shifts - as never before. But something has changed in the last few years.

"There's less chance of promotion, less chance of a pay rise, and at the same time, prices just go up and up and up: petrol for the car, tickets for the train, childcare for the kids, deposits for a first home.

"The 'squeezed middle' has never been so squeezed - and it looks like it will be that for years to come."

He criticised the government's decision to scrap the 50p tax rate for those earning over £150,000 from April 2013, saying "we can't succeed as a country just by hoping wealth will trickle down from those at the top to everyone else".

'Labour's mess'

A Downing Street spokesman said Labour's change of tack on the 10p rate was "a stunning admission of economic incompetence" and the coalition had helped low earners by substantially increasing the personal allowance - the level at which people start to pay tax - to £9,205 in April.

"The losers from Labour's 10p tax fiasco have become winners under this government," he said.

He also warned that a mansion tax "would mean government snoopers in every home to revalue your house for council tax, meaning council tax rises for anyone who's improved their home in the past 20 years".

Lib Dem Treasury Secretary Danny Alexander said Labour were "late to the party" on the need to reduce the tax burden on the lowest paid.

"After thirteen years in government, the only action Ed Balls took was to raise the amount of tax those on low incomes paid by abolishing the 10p rate. It was the biggest tax mistake they ever made and it has taken them until now to realise their error."

 

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  • rate this
    -2

    Comment number 146.

    This is the most wish-washy policy I have heard, and since Cameron in opposition. Until he states how much and where the 10p tax will come from, we cant decide if this is a good idea. I'm all for more progressive tax, I believe their should be a 30% rate between £38,000 and £60,000. So until we have the actual fully-fledged policy, this is nothing but a failed attempted to please the poorest.

  • rate this
    +3

    Comment number 145.

    #113 COLIN
    Not as busy as Labour Party HQ staff must be on here it appears!!!

  • rate this
    +28

    Comment number 144.

    They have already spent it, and there is a £4bn shortfall. Mansion tax raises £2bn, 10p tax rate costs £6bn in first year.

    And its a cracking U-turn by Labour as well LOL.

  • rate this
    +1

    Comment number 143.

    I always liked the 10% band and was very disappointed on Brown's decision to get rid of it. For me if you want to ease the tax burden you can raise tax-free allowances or you can introduce a lower rate. I prefer the 10% option and welcome this u-turn by Labour. But I am guessing in the long term tax-free allowances will also go up less quickly to help pay for this.

  • rate this
    +1

    Comment number 142.

    We criticise politicians when they will not change their mind and also when they will. It is not because we are fickle, it is because we know they are.

  • rate this
    +5

    Comment number 141.

    Change the record, Ed.

    A speech with sound bite after cliché after sound bite is not going to fool anyone.

  • rate this
    0

    Comment number 140.

    Meaningless politically expedient platitudes vomit from the mouth of Ed Miliband like lava from mount Krakatoa in August 1883.

    The coalition's changes to the lowest rate tax-allowance probably makes as much if not more difference to people's monthly tax bills as this would do if it were ever implemented, which it can hardly be at the moment without massively increasing the yearly deficit.

  • rate this
    -3

    Comment number 139.

    One party over-spends and the other two are obsessed with cuts. Surely there is a more creative way of managing an economy?

  • rate this
    +4

    Comment number 138.

    @116 Makes a change from the Labour supporters marking our comments down.

    Also, there is nothing troll-like about being a Tory supporter. People vote Tory, how else do you think they get elected? Better to be a child of Thatcher than a Son of Brown.

  • rate this
    +4

    Comment number 137.

    Sorry Ed/Dave/Nick but I think the only way to make a truely progressive and fair income tax system is to merge income tax and NI and have a single rate of income tax with a decent sized tax-free allowance.

    Not only does that remove most disincetives to work, it will be far simpiler for HMRC!

    As a starter - how does £15k tax free allowance and a combined rate of 40% above £15k sound?

  • rate this
    0

    Comment number 136.

    Lower taxes - gets my vote every time.

  • rate this
    +48

    Comment number 135.

    Typical political gambit. Introduce a tax on a minority based on a high-sounding principle and then as soon as possible expand it to a catch-all. How soon before the average 3-bed semi becomes a "mansion" to be ripped off to pay for Labour's benefit-culture grass-roots support?

  • rate this
    +45

    Comment number 134.

    Typical. Lots of headline grabbing sound bytes but little in the way of actual numbers.

    How much will the 10p tax rate cost Ed?

    How much will be generated by your 'mansion tax'?

    How much will you have to borrow to make up the difference?

    No sign of the answers, is there?

  • rate this
    +3

    Comment number 133.

    didnt these clowns put us in the mess we are in today through very little control and dont forget Brown frivilously spending the days before he left No 10. Dont get me wrong, I'm no tory and will never vote for them, but its going to be a long time coming before people trust labour again....espcially as so many of the team in power are still in the party!

  • rate this
    0

    Comment number 132.

    So just who are these "Treasury sources"? I'm thinking they would be the Tory ministers, who of course, would have absolutely no vested interest in poo-pooing any Labour policy move.

  • rate this
    +26

    Comment number 131.

    Remember when Blair and Brown were called the dream ticket? What a nightmare that was!
    Miliband and Balls? Can't even pretend that is a dream ticket.

  • rate this
    +115

    Comment number 130.

    Why hasn't this been labelled by the BBC as a "massive U-turn?" - oh yes because it's the Labour Party...

  • rate this
    +3

    Comment number 129.

    The NHS waiting list scandal at Lincoln was happening with the last government also house repossessions rocketed http://www.bbc.co.uk/news/business-21456509 Lowering VAT will not help people who have no money only those wanting to buy luxury goods who creamed money off before the last government crashed the banks. 10p Tax? why not a £50000 threshold before it starts and tax where they spend it

  • rate this
    +9

    Comment number 128.

    How much they would do now they are no longer in power! Strange that...

  • rate this
    +3

    Comment number 127.

    So Ed is going to use a LibDem policy to pay for one that he supported cancelling the first time? Clearly a man of vision and ingenuity.

    With people on here complaining about inheritance tax starting to affect 'ordinary' people, one day their houses will be worth 2m. Beware supporting a mansion tax - you might just get it!

 

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