Labour’s plans for a fairer tax system – my Evening Standard article

Governments make mistakes. But when they do it is always better to own up and put them right. The last Labour government did many good things. But we got things wrong too. Scrapping the 10p tax rate, which Labour first introduced in 1999, was one of those mistakes. People understandably thought Labour was no longer on the side of the hard-working people we have always sought to help.

Today Ed Miliband and I are saying that a 10p starting rate of tax should be brought back. It would put right a mistake made six years ago by the last Labour government. At a time when the economy is flatlining and the cost of living is rising it would boost the economy and put money back into people’s pockets. And it would make work pay by ensuring people keep more of their income if they increase their hours.

We want to introduce a 10p rate in government to benefit everyone currently paying the basic rate of tax and pay for it by taxing houses worth over £2 million. That would mean a tax cut for 25 million people across Britain, including more than six million here in London and the South-East. It would send a clear message about how Britain is going to succeed in the years ahead: that when you play your part, when you make your contribution to the economy, you will be rewarded.

Of course we’ve always said that our tax and spending commitments for the next Parliament will have to wait until we publish our manifesto in 2015. That is the right and responsible thing to do because we don’t know what the state of the economy and public finances will be in two years’ time. Because George Osborne did not do that, he was forced this week to abandon his 2007 pledge to cut inheritance tax for estates worth less than £1 million. We are not going to make promises we can’t keep.

But with our economy stuck in the slow lane people rightly want to know more about Labour’s alternative. And our proposal to reintroduce a 10p rate, paid for by a tax on the wealthiest properties, is a clear signal about the fairer tax system Labour wants and the priority we attach to the living standards of working people.

This is in sharp contrast to the choices this Government is making. Millions of working people already hit by higher VAT are having their incomes squeezed further as prices rise faster than wages, tax credits are cut and child benefit is taken away. And rather than helping those on middle and low incomes facing this cost of living crisis, David Cameron and George Osborne are choosing instead to give 13,000 millionaires an average tax cut of £100,000 this April.

This Government seems to think that the way to kick-start our flatlining economy is to help the very richest while leaving everybody else squeezed as never before. But that outdated, trickle-down economics just isn’t going to work. Our economy will only prosper when we ease the pressures facing the vast majority and give everyone a chance to prosper. That is what Ed and I mean by a One Nation economy.

We need a strong and sustained recovery made by the many not just by a few at the top, because right now the economy is simply not working for too many working people in this country. Our economy has now stagnated for two-and-a-half years under this Government and government borrowing is rising as a result as the costs of economic failure mount.

If the economy continues to flatline, wages will carry on being squeezed and rise more slowly than prices. As this newspaper’s front page reported last night, after two-and-a-half years of stagnation, the Bank of England says we now face another three years of falling living standards.

That is why there is now a growing chorus of voices from Right, Left and centre demanding action in next month’s Budget to kick-start our economy and help people on modest incomes. Business leaders are increasingly concerned and urging the Government to put jobs and growth first. The chief economist of the IMF says there should be a rethink in the Budget and even Boris Johnson is demanding a change of tack from his friends in government.

If the Chancellor George Osborne is prepared to set aside political pride, admit his policies aren’t working out and put the national interest first, there are many things he can do. That means going further than simply U-turns on some of his smaller misjudgments, like the pasty tax and the caravan tax in last year’s shambolic Budget, but correcting the bigger mistakes too.

Stop the £3 billion tax cut for the very richest and cancel cuts to tax credits for millions of working families this April. Listen to Labour and business groups, bring forward infrastructure investment and build thousands more affordable homes to strengthen our economy for the future. Repeat the tax on bank bonuses to fund a job for every young person out of work for a year or more — a paid job which they would have to take up or face losing their benefits.

Help small businesses who are the lifeblood of our economy by establishing a British Investment Bank to boost lending, cutting VAT on home repairs and maintenance and introducing a national insurance tax break for small businesses taking on extra workers. And bring back the 10p tax rate to help millions of working families and make our tax system fairer now and for the future.

The longer the Government clings on to its failing economic policies, the worse off people will be, the more long-term damage will be done and the further behind other countries we will fall. Britain cannot afford another two-and- a-half years of this. Labour is acknowledging its mistakes and is determined to put them right. It’s time this Conservative-led government did so too.

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Posted February 14th, 2013 by Ed