At long last, Ed Miliband delivered us a Valentine’s Day present that everyone in the political world has been waiting for: a new policy! And a tax policy at that!
Not just content with maintaining support for a temporary VAT cut, reversing the Coalition’s tax credit restraint and reversing the 50p tax rate cut (all of which would worsen the deficit), the Labour leader has nailed his colours to a new mast. He wants to bring back the 10p rate of income tax, which his former boss Gordon Brown abolished, paid for by a mansion tax on homes worth £2 million.
Now, there are many observations which can made about this.
First, this is a huge u-turn for Miliband personally. Back in 2008, after the budget where the 10p rate was abolished, he said:
‘When you make a big set of changes in the tax system, some people do lose out. That is a matter of regret. Of course it is. But overall these changes make the tax system fairer.’
So it seems he has been put under pressure to adopt this policy by the effective campaigning of Tory MP Robert Halfon, who recently organised a Westminster Hall debate on this very issue and has pushed the introduction of the 10p rate on these pages.
Second, either Labour’s numbers don’t add up, or this would lead to an incredibly large mansion tax or an incredibly small 10p tax range. Our research into the Lib Dem mansion tax concept suggested it would raise £1 billion. Yet we know the reintroduction of the 10p tax rate between £9,440 and £12,500 has been outlined by the Treasury to cost £7 billion in lost revenues. Therefore, calculations suggest either Labour’s policy would lead to a very very small 10p tax rate band, making it little more than a gimmick, or that their mansion tax is going to be very punitive.