A future Labour Government would bring in a 10p lower rate of income tax funded by a mansion tax on homes worth more than £2m, Ed Miliband announced today.
In the first clear sign of Labour’s tax policy, Mr Miliband admitted that Gordon Brown was wrong to abolish the 10p starting rate of tax in his last Budget as Chancellor in 2007. His announcement comes amid growing Tory pressure on George Osborne to announce a 10p rate in next month’s Budget, although the Chancellor’s allies are playing down the prospect. Instead, the Coalition is committed to raising the threshold at which people start to pay tax to £10,000 by 2015.
Mr Miliband embraced the Liberal Democrat plan for a mansion tax, which the Conservatives have blocked inside the Coalition. Under the Lib Dem plan, a 1 per cent annual levy would be imposed on the value of the home above £2m. So a £3m home would face a £10,000-a-year bill.
Labour sources said its proposed 10p band would apply to the first £1,000 of taxable income, and be worth about £100 a year to the 25m basic rate taxpayers. The mansion tax would apply to about 70,000 homes and raise about £2bn a year, they said. Although Mr Miliband stopped short of saying the plan will be in Labour’s 2015 election manifesto, it looks certain to a flagship commitment.
The Labour leader said that, while resources would be scarce after the 2015, choices could still be made. He announced: “We would tax houses worth over £2m. And we would use the money to cut taxes for working people. We would put right a mistake made by Gordon Brown and the last Labour government. We would use the money raised by a mansion tax to reintroduce a lower 10p starting rate of tax, with the size of the band depending on the amount raised. This would benefit 25m basic rate taxpayers.”
Speaking in Bedford, the Labour leader recalled that Harold Macmillan, the former Tory Prime Minister, made a speech there in 1957 telling Britons they had “never had it so good.” He said: "Far from feeling they have never had it so good, millions across Britain today fear 'they will never have it so good again.’ ”
Warning that most families are now facing a growing crisis in living standards which will last for years to come, Mr Miliband 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 that our economy will only prosper when the vast majority of the people of this country prosper too. We believe it is when working families have confidence and security; when they can invest in their future; and when they can start businesses of their own that Britain will succeed.”
The Labour leader said: "Britain is at a fork in the road. We can carry on as we are: falling wages, low growth, failure to tackle the deficit. Or Britain can take the path I have outlined: a recovery made by the many, not just a few at the top. A recovery made by building not squeezing the middle. A recovery made by all of us playing our part."
After criticism that Labour lacks policies, aides said Mr Miliband was setting out the clear difference between a One Nation Labour agenda for economic recovery made by the many, not just a few at the top - and a Conservative strategy that consists of trickle-down from the top, a squeeze on the middle and a race to the bottom.
Mr Miliband warned: “We cannot go on with an approach that simply promises more of the same: year after year of squeezed living standards for the majority of working people. Because it's wrong for them and because it's wrong for our economy."
He added: “The ‘squeezed middle’ has never been so squeezed. And if we carry on as we are it will be like that for years to come.It’s no wonder our economy isn’t growing when people can’t afford to buy the things that British businesses try to sell.”
Mr Miliband reiterated that a Labour Government would take action to break the stranglehold of the big six energy suppliers; stop the train company price rip-offs on the most popular routes; introduce new rules to stop unfair bank charges and cap interest on payday loans.