Mansion tax on its way under Labour

Posted on 07 Feb 2013
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Labour will re-introduce the 10 pence starting rate of tax scrapped by Gordon Brown in 2008 if it is re-elected, Ed Miliband has announced, reports small business accountants Harris & Co.

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 would be paid for by a new "mansion tax" on £2m properties, he indicated in a speech in Bedford.

Treasury sources said Labour had no "economic credibility".

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 if returned to power after the next election, 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.

Start Quote

We would put right a mistake made by Gordon Brown and the last Labour government”

End Quote Ed Miliband Labour leader

"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."

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 that doing so earlier would not be sensible.

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 and has been "consistent" since going into opposition about their desire to bring it back.

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.

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

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".

"Building not squeezing"

Mr Miliband said: "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.

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That"s why as we deal with Labour"s mess we have also cut income tax, capped benefits, frozen fuel duty and frozen council tax”

End Quote Treasury aide

"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.

"We need very successful entrepreneurs in Britain, making profits, being rewarded," he said. "But we can"t succeed as a country just by hoping wealth will trickle down from those at the top to everyone else, our economy won"t turn around that way."

"Labour"s mess"

And he challenged David Cameron"s rhetoric of ensuring Britain is competing in the "global race".

"It is essential that we compete with China and India and others," he said. "But I have to level with you, Britain won"t win a race to the bottom by competing in the world as a low skill, low wage economy."

In response, Treasury sources said Labour "wrecked" the economy with excessive spending and borrowing - and their plans would result in a £200 billion increase in borrowing.

"But we know how hard it is for hard-working people up and down the country," an aide to the Chancellor said. "That"s why as we deal with Labour"s mess we have also cut income tax, capped benefits, frozen fuel duty and frozen council tax."

In a separate development, Jon Cruddas, who is coordinating Labour"s policy review, will launch an inquiry into "The Condition of Britain" to be led by the centre-left thinktank the Institute for Public Policy Research.

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