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Tuesday, 24th June 2008

Where it all went wrong for Brown: the 10p tax debacle

Peter Hoskin 3:15pm

Here's the first in our series of posts looking back over the mistakes made by Brown in his first year as Prime Minister. Later in the week, you'll be able to vote on which mistake you think is the worst.

21 March, 2007. With the words “A Budget for Britain’s families, for fairness and the future,” Brown had just finished his last Budget speech as Chancellor. Or so it seemed. But like Columbo circling around to ask “just one more thing”, he had another announcement to make:

“With the other decisions I have made today we are able to hold to our pledge made at the election not to raise the basic rate of income tax.
Indeed to reward work, to ensure working families are better off, and to make the tax system fairer, I will from next April cut the basic rate of income tax from 22p down to 20p.
The lowest basic rate for 75 years.
And I commend this Budget to the House.”

He’d just lobbed a firecracker into the House. And – again, shades of Columbo – there was a glint in Brown’s eye as he did so. He was loving this. The Labour benches cheered. The Tories sat stunned. Finis.

But the Labour glee was misplaced. They were cheering for one of the most despicable Parliamentary episodes in recent memory. You see, Brown’s largesse to middle-income earners had to be paid for. And the small print in the Red Book revealed how he’d done it. The 10p tax band for low-income earners had been abolished. As of April 2008, those low-earners would now be paying the 20p rate as well. This wasn’t a tax cut – it was a tax con.

So why had Brown done it? After all, wasn’t he the Great Socialist Hope? Someone who’d look out for the least well-off in society? Apparently not, it would seem. Here was a blatant effort to woo the C2s that had flocked to Blair in 1997. With his 2 pence of the basic rate of income tax, he was saying: “stay with me when I’m Prime Minister. I’ll look out for you.” And damn whoever loses out.

In other words, the 10p tax con was the first major decision of Brown’s premiership, despite coming whilst he was Chancellor. And, boy, how that decision’s backfired.

Fast forward to just over a year later – April 2008. In the meantime, there’s been surprisingly little mention of the abolition of the 10p tax rate. But the country’s changed. The economic storm clouds that were on the horizon in early 2007 have, by now, gathered and darkened. Most low-income earners are struggling against rising food and fuel prices, and mortgage repayments are becoming an ever-greater burden. This is perhaps the worst atmosphere in which to implement tax hikes on the least well-off. But on 6 April that’s what happened. The abolition of the 10p tax band came into effect.

It may have taken a year, but the real damage for Brown came when his own MPs started to speak out against the injustice of it all. Chief among them was Frank Field, who fronted a rebellion against the measure (read Frank’s article for the Spectator here). And the mixture of “Labour turns its back on voters” and “Labour in disarray” stories was poisonous for the party’s poll ratings and for approval in Brown’s premiership. Of course, the rebellion eventually fizzled out after Darling announced he'd arrange a compensation package for the 10p losers. But the damage had already been done.

And then came the compensation package, announced on 15 May. That’s when things got really messy. You see, this package added some £2.7 billion to the national debt - and at a time when the public finances are spent, borrowed and taxed to the hilt, as it is. It's the economics of a madhouse, and it completely dispels the notion that Brown is anything like a steady hand on the fiscal tiller. Throw in the fact that this measure wasn't introduced in March's Budget, but a few days in advance of the Crewe & Nantwich by-election, and it also seems very cynical indeed. Thankfully - as subsequent events proved - the public didn't buy it. But that's a pretty thin tonic for the future generations who'll have to spend years paying back Brown's mountain of debt.

But worse than all this - for Brown - is how his 10p tax con has contaminated the Labour brand. It will now be some time before the party can claim it is the champion of the least well-off. Just as Blair used to mock the Tories for no longer being the party of "sound economics", so too can Team Cameron attack this Government for departing from its ultimate selling point. Come the next election, the effects could be catastophic for Labour.

Looking back on the 10p tax debacle, the narrative becomes clear. It was Brown putting his ambition before the good of low-income earners. It was fiscal mis-management on the largest scale. It was the moment Labour was wrenched from its roots. It was cynical, exploitative and needless.

It was our Prime Minister at his very worst.

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Mike, Brighton

June 24th, 2008 4:40pm Report this comment

"It was cynical, exploitative and needless".
It was also an act of political suicide that will sit comfortably alongside the poll tax in the painful history of political careers destroyed.
"Come the next election, the effects could be catastophic for Labour."
Change "could" to "will" and you are about right.

Tiberius

June 24th, 2008 4:43pm Report this comment

The great deceit was that there was no specific mention of the abolition of the 10p band in the budget speech. I remember picking up a comment about a change in the savings rate, which caused my ears to prick, but it was 10 minutes after the speech that the first Radio 4 pundit revealed the deception. And, of course, Cameron didn't pick it up at the despatch box either.

So as ye sow, so shall ye reap; in spades for the Kircaldy Kipper.

john miller

June 24th, 2008 4:44pm Report this comment

Tragically, I forget where I read it. but it was someone like toynbee who wrote that at Brown's final flourish, Blair sat there with a small grimace on those prissy lips, as he realised how tragic this was all going to be.

I commented that I recalled Blair being ecstatic at the announcement, congratulating Brown on his masterstroke (!).

It gives me inordinate satisfaction to see that the NuLab hack lied and my memory did not play me false.

Let us celebrate the 985th time that video evidence has caught out the NuLab liars.

John

June 24th, 2008 5:15pm Report this comment

And even at his 'best', he is still the worst PM in 70 years. And he was the worst chancellor in a century. Surely everyone saw this as soon as he sold gold at the bottom for some ready cash? Nobody but a madman, or someone who has reached rock-bottom by being a madman, does that.

Ian C

June 24th, 2008 5:18pm Report this comment

While this was the moment he chose to screw up, it was always a question of when, not if the wheels would come off.

The timer had been ticking fro many a long year and writers like M Paris and R littlejohn had been saying for years that he was fundamentlly flawed.

Looking back, it is one (more)big lesson in how we must have a constitution to stop our politicians from ever beingthere so long that they can play such havoc with us all.

It always happens once a government has been in power too long and with extended time in too strong a position. We have to find a way that generates renewal within the system before those leaders can do too much damage.

Ironically in America the limiting of terms works the other way - inclined to recklessness in Term 1 then feeling the limitations in Term 2. That is better than the way we do it as our system inherently over supports the majority and over-restricts the ability to oppose.

Ian C

June 24th, 2008 5:21pm Report this comment

While this was the moment he chose to screw up, it was always a question of when, not if the wheels would come off.

The timer had been ticking for many a long year and writers like M Paris and R Littlejohn had been saying for years that he was fundamentally flawed.

Looking back, it is one (more) big lesson in how we must have a constitution to stop our politicians from ever being there so long that they can play such havoc with us all.

Perspiring Perry

June 24th, 2008 5:54pm Report this comment

Do we have a lexicon of Noo-Lie-Bore weasel words and phrases? They could be wired into a machine that rings bells and causes a light to flash.

I now cringe when I hear

‘ensure working families’
‘reward work’
‘pledge’
‘make tax . . fair / fairer’
‘I will . . . cut . . ‘

There be plenty more to join them, but writing these few makes me feel ill so I’ll stop.

t‘trouble is . . . the Beloved & Supreme Leader probably still indulges himself in unhesitating pride at their thought, so out of touch is he.

LilyS

June 24th, 2008 6:00pm Report this comment

Perry: you've got to add "investment" to that list...

EyeSee

June 24th, 2008 6:25pm Report this comment

I think you will find that the moment of disaster for Brown and Britain was the day he became Chancellor. I'm not sure when the public generally became aware that Brown was as big an idiot as Blair, Straw, Mandelson etc etc etc

Hysteria

June 24th, 2008 6:40pm Report this comment

John Miller - I caught the same point - (I think you are correct it was Ms Polly) - and I am pleased the video supports our memory of what actually happened

(Note to political campaigns - I assume you have a permanent staff reviewing the wealth of evidence on the internet relating to what people said - as opposed to what they claim they said - ?

John (5:15) - related to this - 20/20 hindsight is a wonderful thing - but I have not yet seen any posting to a comment made at the time of the sale pointing out it was a bad (or good) thing. What matters is what folks said then, IMHO.

Hysteria

June 24th, 2008 6:42pm Report this comment

that would be
"hard working families"

gotta add
"no more boom and bust"
"tractor production is up again"

downunder

June 24th, 2008 6:50pm Report this comment

The speech last year with the obtruding autocue - downhill from thereon in.

dexey

June 24th, 2008 8:27pm Report this comment

In 5 weeks I retire and would have fallen into the 10p tax band. It would have been very helpful. I do not qualify for any of the state handouts.
I will never vote for this bunch of Scots led liars even though my excellent constituence MP is likely to lose his seat.

King Prawn

June 24th, 2008 8:33pm Report this comment

John Miller

Apparently, Blair kept that grin on his face until he arrived back in Downing Street.

Once the door closed, he let rip with a tirade against Brown. He knew what a mistake that Brown had made.

But there have been other massive mistakes that have been made:-

1. Going to Iraq in the middle of the Tory Conference was a massive mistake from the our so-called spin-free leader;

2. The Labour Conference. Basically, Blair become a non-person and Brown was seen as 'change'. Change from what exactly. If you cannot discuss the Blair premiership how can you define what you need to change;

3. Iraq. Leaving Saddam's former palace in Basra and then encamping to Basra airport just as the 'Surge' in the North of Iraq started to work. Then watching from the sidelines as the Iraqis and the Americans battled the Mehdi Army to retake Basra. Must have been embarassing for the British soldiers encamped near the airport;

4. Scrapping A-Levels for the diploma. Yet more dumbing down of our higher education system.

David C

June 24th, 2008 8:52pm Report this comment

Eye see:
Brown has been practising 'student politics' all the while he was at the exchequer. A pocket revolutionary.
He sees himself as an iconoclast.
He is an even bigger idiot than Blair et al

Karen

June 24th, 2008 9:09pm Report this comment

King Prawn, I too have heard that story, Blair apparently challenged Brown about the losers of the 10p tax. But with Blair being economically illiterate Brown was able to brush him off. How Blair must have had a GENUINE smile on his face when Field led the rebellion.

STAN, UK

June 24th, 2008 9:33pm Report this comment

Just watched the response that Cameron gave to that Budget and in hindsight it was fantastic and spot on. He should listen to it again and make the exact same speech soon, as everything he said seems even more relevent now.

Tina

June 24th, 2008 9:39pm Report this comment

Everyone, watch DC reacting to Brown's budget, it's classic. My favourite bit:

'Billions raised, Billions borrowed, Billions spent and no idea where the money has gone. With a record like that the Chancellor (Brown) should be running for treasurer of the Labour party not Prime Minister.'

If only DC could make more speeches akin to that, Tories would sound even more credible on the economy. That speech would resonate so much more with the public now than it ever did back then.

King Prawn

June 24th, 2008 10:24pm Report this comment

Karen. Let's be honest what could Blair do, he was about to lose power.

If it wasn't for Blair, Brown would be claiming even more tax from us.

Just before the 2005 Election Campaign, Brown wanted to get rid of the Private Principal Relief on Capital Gains Tax. Plans were well in advance, but Blair stopped Brown doing it.

I don't think that Blair was as economically illiterate as many people believe.

Tankus

June 24th, 2008 10:24pm Report this comment

Browns visit to SA ,... you don't think that he was actually job (potential personal sources of revenue) hunting do you ?,bit like Blair's visit to the states in his final "rock star tour" of the US of A and blue peter/good morning smarmfest ...

Petrol prices/production just a cover ...

He cannot be that stupid not to realize that the game is up. !

chris

June 24th, 2008 11:14pm Report this comment

What a cynical and corrupt exercise. And how they cheered! Brown's supporters eulogising him as understanding everything, knowing everything before everyone else. It is to Blair's shame that he never challanged Brown over his leadership plans and let this boil on the Labour Party fester!