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
    +4

    Comment number 166.

    I can't help thinking that taxing static capital, particularly property, as opposed to financial transactions is a very difficult thing to manage in practice. Like the window tax of 1696, there will be various ways to avoid it by reducing a property's value, e.g. splitting the property up, deliberately damaging a superfluous part of the property, making over land to a forestry trust etc. etc.

  • rate this
    +1

    Comment number 165.

    I find it interesting that most of the commenters on here are opposed to taking money off the very richest, and to pay for a tax cut for those on lower and lower to middle incomes.

    Not only is this policy going to make things fairer; it will boost consumer demand, that will then boost growth by putting money in working people's pockets, rather than the rich who squirrel it away.

  • rate this
    +3

    Comment number 164.

    10% tax rate? Why bother when raising the threshold is more effective?

    What IS needed is a number of additional bands in the council tax system as currently in England there is no distinction between a house worth £320k and a house worth millions. I do wish they would stop calling it the mansion tax though as that implies it's something new rather than a bolt on for an existing system

  • rate this
    -2

    Comment number 163.

    What a joke...

    Not only is this a U-Turn on behalf of the Labour Party, it is also destined to fail. If this were to happen, it may stimulate the economy, but you'd be losing out on half the tax money provided by those earning less than 40k-ish p/a.

  • rate this
    0

    Comment number 162.

    .
    Re141.Leodisthefirst
    “Change the record, Ed.A speech with sound bite after cliché after sound bite is not going to fool anyone.”


    It works for Cover-Up Cameron and Part time Osborne every day and they talk absolute rubbish, or should I say just lie

  • rate this
    0

    Comment number 161.

    Cont from post 96.

    Also, a lot more attention needs to be paid to raising the threshold for the 40% income tax rate, ideally to least £50k. The coalition have cut this in recent years and appear to have gotten away with it. Along with scrapping the 50% tax rate, and bringing back the 10% rate this would make sure tax cuts benefit all sections of society, thus making it a 'One Nation' policy.

  • rate this
    +4

    Comment number 160.

    Here we go again- politicians' carrots for votes. No matter who's in power, we're a poorer nation, wealth flooding East-that's the problem. If we want services, we have to pay-money doesn't grow on trees.
    Next thing Mr M will promise a referendum on Europe-that won't happen either.
    More proof most politicians are liars

  • rate this
    -26

    Comment number 159.

    About time. Why should millionaires get a tax break, at the expense of the hardworking taxpayer, whilst they lounge around in mult-million pound properties doing nothing all day? People are losing their homes working 40 to 50 hours a week to make ends meet. Tax them all at 60p in the pound as well.

  • rate this
    -1

    Comment number 158.

    Miliband's "policy" is tripe. There is only one person who will end up "squeezing the middle" and that is Ed Miliband. Labour exist to do the will of the public sector unions and those living off benefits. So Labour will spend more and will tax more, Labour will not be able to get what they need off a few rich people so they will attack the lower middle class. Keep them out.

  • rate this
    +4

    Comment number 157.

    pointless promises. The rich have far more experience of dodging tax than the government have of collecting it.

  • rate this
    +2

    Comment number 156.

    Labour have no credibility. They bodged this once and would probably bodge it again. Painting themselves as the working class party is just detracting from the fact they would make a mess of encouraging growth from the top down.

  • rate this
    -39

    Comment number 155.

    It's unfortunate that we live in a democracy where ignorant people still have the vote. he is getting to the heart of the issues in a factual and unbiased way. If you can't see that you deserve to have David Cameron and George Osborne. When they put VAT up to 50% and abolish the minimum wage you'll cheer that too.

  • rate this
    -1

    Comment number 154.

    92paolo43
    Miliband & Ed Balls = Laurel & Hardy
    -
    Trouble is that Cameron & Osbourne don't even have the redemption of being portrayed as a comedy couple.

    I think I would rather have someone in power who actually cares about the people in this country.

    Cameron & Osbourne haved been proven to be useless in every way possible & they couldn't give a t*ss about you or me

    And they're not even funny!

  • rate this
    +64

    Comment number 153.

    For a few blissful weeks, I'd forgotten all about Ed Miliband

  • rate this
    +1

    Comment number 152.

    So now the Coalition are borrowing Labour policies? Gordon Brown bought this in - the pity is that it was eventually abandoned. Sick of this hopeless Coalition, sick of politicians' lies and subterfuges. Fair deal needed now for the average person and no more squeezing the poor to give to the rich.

  • rate this
    +23

    Comment number 151.

    Labour is late to the party. They doubled the income tax for those on on low incomes by scrapping the 10p rate but, thanks to the Lib Dems in the Coalition, those made worse of by Labour will soon be paying no income tax at all on the first £10k they earn. If Labour cared so much about the 50p tax rate why did they introduce it 35 days before they were kicked out of office? They're not credible.

  • rate this
    +2

    Comment number 150.

    Gesture politics , numbers wont add up .

  • rate this
    +2

    Comment number 149.

    How much of a persons income would the new 10p rate apply too? Given that the current government is anyway pledged to raise the tax free allowance to £10,000 I doubt this will make much difference at all. Just another gimmick to attract votes.

    The Labour party introduced the 10p tax rate in 1999, then scrapped it in 2007, and now want it back again! Make your mind up Mr. Milliband.

  • rate this
    +1

    Comment number 148.

    Leaving aside party politics and party personalities, this is a fairer taxation system. And the scrapping of the top 50p tax rate was wrong.

  • rate this
    +1

    Comment number 147.

    I don't know whether to laugh or despair at these comments.
    When the govt make a policy, the most upvoted comments are criticising it.
    When the opposition make a policy , the most upvoted comments are also criticising it.
    So, all we can summise is that none of the politicians in Westminster can be trusted with our country?

    Or is it that people have unrealistic expectations?

 

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