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Can We Trust Labour's Surprise 10p Announcement?

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Ed Miliband's surprise announcement today - that he may now support my www.GreatGordonBrownRepealBill.com campaign - seems rather a half-hearted Damascus conversion. Only in 2008, HuffPost readers will remember, the Labour Leader said that abolishing the 10p rate of income tax for the poorest Brits was "fairer", and he voted that way in Parliament. Today, in opposition, his tune is different. Mr Miliband says that if Labour were in government "now" that they would partly undo this disastrous decision, and would also create a new homes-tax. (Mr Miliband was careful to stress that this is "not a manifesto commitment" for 2015.)

What are voters to make of this? In my view, what the public want to know is this: is this just jam for the Eastleigh by-election or is this a substantive policy pledge? Consider the record of the two main parties: Ed Miliband has whipped his MPs to vote against every single tax-cut for the poorest Brits that the Coalition has delivered; whether this is on council tax, fuel duty, or income tax. By contrast, Conservatives in government this April will cut income taxes for 25million people. Two million will have been taken out of income tax altogether. And, the poorest who benefited from the 10p rate under Labour (until they scrapped it in 2008) now pay no income tax at all, with David Cameron in Downing Street.

In some sense, this is a missed opportunity. Today could have been a real policy announcement from Labour, rather than a PR wheeze written on the back of an envelope. As it stands, Labour's suggestion would only mean an extra £34 a year for a family (according to Policy Exchange) and even their new homes-tax doesn't fund it all. That's not what Britain needs. Instead, we need a substantive income tax reform - as set out on www.GreatGordonBrownRepealBill.com - which not only give us a proper 10p tax-rate from £9,440 to £12,000, but also pays for it by redistributing extra revenues raised from the new top income tax rate of 45p.

Labour always attack my party about 'tax-cuts for millionaires'. But in reality, wealthy people are taxed more now in every year, than in any year under Labour (e.g. see the huge rise in capital gains tax). But Conservatives do need to do more. Famously, in his final act as Chancellor - Gordon Brown scrapped the 10p band in 2008, supported by Ed Miliband and Ed Balls. Overnight, this crushed people with a tax-rise of £232 annually: pushing the poorest workers even further away from a Living Wage. Real incomes have been stagnant for 10 years. Many small firms cannot afford to pay higher salaries; and the tax-credit system is complex and does not always get money to the people who need it. That's why cutting taxes is our only option for helping the low-paid. Already in parliament, and through the website www.GreatGordonBrownRepealBill.com I have argued that the focus must be on lifting the burden of taxes off the low-paid. Once we have lifted the personal allowance to £10,000, I think the next step must be to restore the 10p rate.

Some people will say, "Why not just increase the personal allowance even further?" To them, I would quote Nigel Lawson. He started off as Chancellor prioritising tax allowances. Then he changed course. He later said: "I wished to create a large constituency in favour of income-tax reductions. The last thing I wanted to do was to reduce the size of that constituency by taking people out of tax altogether."

That's why my argument is to bring back the 10p rate, on earnings between £9,440 and £12,000 a year to begin with - and then hopefully to medium and higher salaries in the future. It would be popular. It would be symbolic of this government's mission to repair our economy, and to help workers on the lowest incomes. And it would help to tackle the desperate stagnation in family incomes, which we have suffered from in the last 10 years.

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