Labour wants mansion tax to fund return to 10p rate
The battle lines on taxation for the 2015 general election were drawn yesterday when Labour made a surprise promise to bring back a 10p starting rate of income tax.
Ed Miliband announced that the move would be funded by introducing a mansion tax on homes worth more than Â£2m, which would raise Â£2bn.
Labour's proposed 10p band would apply to the first Â£1,000 of taxable income and would be worth Â£100 a year to the 25 million basic-rate taxpayers, who currently pay 20p in the pound.
But people paying the 40p higher rate would not benefit.
The Labour leader admitted that Gordon Brown's decision to abolish the 10p rate in 2007 was a mistake. Although he and his shadow Chancellor, Ed Balls, both close Brown allies, defended the move publicly, Mr Balls said yesterday: "Both Ed Miliband and I said to Gordon Brown at the time that it was the wrong thing to do; it was a mistake. He was Chancellor and he made that decision."
Mr Miliband answered growing criticism that Labour lacks policies by trying to outflank the Conservatives on tax cuts and committing his party to a mansion tax. Some 70,000 properties would be affected, with Labour saying that more than half are second homes.
The high-value property tax has long been favoured by the Liberal Democrats, who want a 1 per cent annual levy on the value of a home above Â£2m. So a Â£3m property would attract a Â£10,000-a-year charge. The Tories, who have blocked the idea inside the Coalition, warned that the tax would mean "government snoopers" assessing the value of all homes.
The Liberal Democrats welcomed Labour's conversion to a mansion tax but insisted the best way to help people on low incomes is to raise the threshold at which people start to pay tax, which the Coalition will increase to Â£10,000 a year by 2015. Labour argued that a 10p rate would be more progressive and do more to boost work incentives.
Although Mr Miliband stopped short of saying his tax plan will definitely be in Labour's 2015 election manifesto, it looks certain to be a key commitment. Labour may also pledge to bring back the 50p top rate of tax on incomes above Â£150,000, which will be cut to 45p in April.
Speaking in Bedford, where in 1957 the Tory Prime Minister Harold Macmillan said Britons had "never had it so good", Mr Miliband said that falling wages and rising prices meant many now felt "they will never have it so good again". He added: "We can't succeed as a country just by hoping wealth will trickle down from those at the top to everyone else."
The Labour leader said: "There is a big choice that will dominate the next election. It is a choice between two different visions of our economy. The Conservative vision of a race to the bottom in wages and skills, rewarding those at the very top but leaving everyone else squeezed as never before or the One-Nation Labour vision. We believe our economy will only prosper when the vast majority of the people of this country prosper too."
David Cameron, who goaded Mr Miliband about Labour's lack of policy on Wednesday, was caught on the hop. He accused Labour of coming up with "a policy that looks like it's been cobbled together overnight", but Labour said it had been planned since last October.
A Downing Street spokesman claimed that the Government's increases in the tax-free personal allowance meant that "losers under Labour have become winners".