Labour Plans Mansion Tax To Fund 10p Tax Rate

Ed Miliband has called for the 10p tax rate to be reintroduced, funded by a mansion tax on homes worth more than £2m.

In an audacious bid to outflank David Cameron, he claimed Labour would use next month's Budget to bring back the band controversially scrapped by Gordon Brown in 2007.

The measure, which if reinstated in full would cost an estimated £7bn, would be funded by a mansion tax on homes worth £2m or more, Mr Miliband explained.

The announcement was a surprise inclusion in a major speech on the economy in Bedford, which had been billed as featuring no significant new policy.

Workers would save £250 if the first £2,500 of taxable income was subject to a 10p rate instead of 20p, but Mr Miliband said his giveaway would depend how much a mansion tax raised.

He said: "A One Nation Labour Budget next month would lay the foundations for a recovery made by the many, not just a few at the top.

"Let me tell you about one crucial choice we would make, which is different from this Government. 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 25 million basic rate taxpayers - moving Labour on from the past and putting Labour where it should always have been - on the side of working people."

"Cobbled together": David Cameron in Eastleigh on Thursday

The Labour leader will be hoping that, in one swoop, he has stolen Mr Cameron's thunder and also appealed to the Lib Dems who champion a mansion tax.

The move is also a clear attempt to pile pressure on Chancellor George Osborne, who will deliver his Budget next month amid mounting concerns about the sluggish recovery.

And it will be seen as a clever tactical move as Mr Miliband tries to restore the public's trust in Labour on the economy because it is a clear rejection of his predecessor.

Tory MPs have recently been campaigning for the return of the 10p rate and the Prime Minister appeared to signal he was open to the idea at PMQs on Wednesday.

"We won't forget the abolition of the 10p tax rate," Mr Cameron said when Mr Miliband argued the coalition was doing little to help ordinary workers.

The coalition is already committed to raising the income tax threshold to £10,000 over this Parliament but the Treasury was also understood to be considering plans for a new lower tax rate.

Mr Cameron, on a visit to Eastleigh, said: "My prediction is that they won't have thought it through or costed it properly and we will discover over the course of the day all sorts of problems and issues with a policy that looks like it has been cobbled together overnight."

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