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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