Miliband backs 10p tax rate

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A Labour government would re-introduce the 10p tax rate, funded by a “mansion tax” on homes worth over £2m, Ed Miliband has announced

The Labour leader claimed Gordon Brown was “wrong” to controversially scrap the 10p starting rate of tax in 2007.

Miliband made a speech in Bedford today promoting a “fairer tax system” under Labour to help “millions of working people”.

"We would tax houses worth over £2m and we would use the money to cut taxes for working people," he said. "We would put right the 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 25 million basic rate taxpayers,” he added.

He also urged the coalition to consider the "progressive choice" and introduce it at next month's Budget.

However, he did not confirm the proposal as part of Labour’s manifesto but said it was a clear “signal” of the party’s convictions on tax.

Miliband renewed his call for a temporary cut in VAT to kick-start the economy, and called for action on train fares, bank charges and payday loans.

"The 'squeezed middle' has never been so squeezed - and it looks like it will be that for years to come," he said.

“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, tackling low growth and reducing the deficit, building not squeezing the middle, all of us playing our part in turning this economy around,” he added.

David Ingall, consultant at JWPCreers, says Ed Miliband is “simply playing to the crowd.”

“Ed Miliband’s pledges are simply sound bites that appeal to his party members but have little substance,” he said.  “The mansion tax is a fantasy, bearing in mind the vast difference in property values between the North and South of the UK and the amount of any mortgage to be deducted. You can own a £3m house but if the mortgage is £2.5m you really only have £0.5m of value. That is besides the issues about valuation.

“Ed Miliband’s predecessors learnt to their cost that trying to tax according to theoretical valuation is a nightmare and breaks the rule that any tax imposed must be vaguely understood by those paying it. The 10p rate is an irrelevance, the band at the reduced rate grants little benefit and adds to the complexity of the system.”

Jonathan Russell, partner at UK200Group member firm ReesRussell, believes Miliband is positioning himself for the possibility of a coalition Government after the next election.

“He (Miliband) obviously sees a Lib-Lab pact re-emerging,” he added.

“A 10p tax is wrong for all the reasons, it was wrong before, but in particular it is better to take people out of tax altogether than charge a very low rate of tax to more people as the cost of administration and collection far outweigh the tax collected,” he said.

“It is the same that happens at the other end of the tax scale where if the rates are pitched too high then the tax take actually drops as people find more ways to avoid paying. The mansion tax exactly as wanted by Nick Clegg is clearly a political stance to endear Labour to the Lib Dems.”

 

Raymond Doherty

 

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