10p and the mansion tax

Ed Miliband Bedford

There has been a bit of background chuntering that Ed Miliband needed to start unveiling some policy proposals.

Today’s speech in Bedford did just that.

The centrepiece of it was a pledge to reintroduce the 10p tax rate for lower-paid workers. This was introduced by Gordon Brown in 1998 and then in a bizarre and frankly morally indefensible move scrapped in his final budget as chancellor in 2007 in order to fund a cut in the basic rate from 22p to 20p.

As I’m someone who supported the Iraq war and continues to believe it was the right thing to do, it was this taxation decision more than any other of our policies in government from 1997 to 2010 that gave me the greatest moral qualms.

At the time that he announced it, it seemed so implausible that he was actually increasing tax for the low paid that I persisted in believing for a while after the budget speech that what I had heard Gordon propose was abolition in the sense of reducing the 10p tax rate to zero, when in fact he was raising it to 20p!

It didn’t make any sense in the context of Gordon’s previous consistent efforts at redistribution through tax credits and the minimum wage. The net effect was to increase tax for five million people. The Institute for Fiscal Studies calculated it made people earning £5,000 to £18,000 the biggest losers.

Gordon lost his political trump card with that decision: the moral authority he rightly held as a campaigner and fighter against poverty at home and abroad.

I think this was a significant, though obviously not the only, factor in Gordon’s eventual defeat in 2010. It made people think we would knife the very people we were most supposed to protect, and that we had lost our moral compass. If we could do this, it suggested we would do just about anything, and there was no fundamental social democratic ideology underpinning our decision-making.

The impact at the time of the 10p rate abolition was electorally catastrophic. The first time it hit people’s pay packets was in April 2008, immediately before a crucial set of local elections. Unsurprisingly, people whose take home pay we had just cut gave us a blunt Anglo-Saxon response either at the ballot box or by just staying at home.

The day after those elections, on May 2 , 2008, I wrote in my blog:

‘Whatever last night was, it was not a rejection of New Labour

A rejection of a tax change that wittingly or unwittingly left millions of lower paid workers worse off in the pay packet they got immediately before they voted – yes.

A howl for attention about being screwed by mortgage lenders and fuel prices and food prices and not being convinced politicians understand how tough it is out there, or are addressing it – yes.

But abolishing the 10p rate is not “New Labour”, in fact it is the antithesis to a philosophy that is about combining social justice with economic prosperity.

We know how to win general elections: we’ve done it three times. The formula that won those elections isn’t unpopular, it’s that we deviated from it and dumped on some of the people we are here to represent that’s unpopular.’

I stand by that analysis so I am delighted that Ed has now proposed to reintroduce one of New Labour’s finest policies.

He has drawn a line under one of the greatest mistakes of our time in government and taken us back to an agenda associated with three general election victories.

I am even more pleased that he announced it as a responsibly costed policy, funded by a mansion tax ‘with the size of the [10p] band depending on the amount raised’.

There is something of the air of a political jackdaw about this announcement, picking up shiny policies from other parties. But we shouldn’t be ashamed of that. Oppositions need to announce policies that are right for the country and are vote-winners.

The 10p rate reintroduction was initially called for by Tory MP Robert Halfon, one of their cleverest operators who, if the Tories had the sense to listen to him, would be crafting them a very popular platform aimed at appealing to blue collar voters. The mansion tax is an idea promoted by Vince Cable, the least toxic and most social democratic by instinct of the Lib Dems. If we are going to steal policies from other parties these are the right places to be looking for them.

Married together, the 10p rate and the mansion tax create a political announcement that puts Ed exactly where he should be politically, battling for the hard-pressed and hard-working, and exactly where he should be ideologically and morally, restating Labour’s – Old and New – finest traditions of redistribution.

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Luke Akehurst is  a councillor in the London borough of Hackney, writes regularly for Progress here and blogs here.

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  • http://www.facebook.com/david.whitaker.5205 David Whitaker

    There needs to be more effective comunication between the membership and leadership before we make our pledges to the people. When we were previously in Government we lost our way on a number of policy announcements and in doing so our membership base was seriously eroded and the leadership did not seem to react at all. The Iraq war as we all know was one of the worst political judgements in The History of The Labour Party and that factor has been proved. We have moved on and we have a leader who is making good progress but we need to be able to deliver a vision that is financaily prudent and safe in regard to safeguarding the income of people on the lowest incomes as well as protecting frontline services.

  • Charlie

    I think this a good policy by the party. First, in that it helps low earning working people by reducing their tax contribution but also the extra money is more than likely to be spent thus helping the economy and allowing the Government to re-claim some of it through VAT and additional corperation tax.

    That said, this policy is in the context of living standards which Ed is seemingly seeking to make the centre-peice of the 2015 election, but in arguing for improving living standards by reducing taxes, how can this be consistent with his previous position of putting employment over wages in the public sector?

    I’d also like to credit the coalition for increasing the personal allowance, as I think the tax system is undoubtly fairer (for working people at least) now than it was even when the 10p tax band did exist (the allowance is higher even after inflation is taken into account, no?). That said working people have been crippled in other ways by VAT and benefit freezes.