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Labour will reinstate 10p tax band, says Miliband

By Richard Johnstone | 14 February 2013

Labour leader Ed Miliband has today pledged to reintroduce a 10p income tax band, paid for by levying a ‘mansion tax’ on homes worth more than £2m.

Miliband said he accepted there ‘would be less money around’ if a Labour government came to office following the poll in May 2015. ‘We know that we will inherit a high deficit and we will face difficult choices,’ he said in a speech in Bedford.

However, a Labour administration would focus on reforms to make the tax system ‘fairer’, he added. Among the ‘new priorities’ would be an additional tax on houses worth over £2m.

Miliband said: ‘Let me tell you about one crucial choice we would make, which is different from this government.

‘We would use the money raised by a mansion tax to reintroduce a lower 10 pence starting rate of tax, with the size of the band depending on the amount raised.’

This would correct what he said was a ‘mistake’ by then chancellor Gordon Brown to abolish the rate in April 2008, making the lowest rate of income tax 20p. Reintroducing the lower rate would benefit 25 million basic rate taxpayers, Miliband added.

The proposal was welcomed by trade union Unison. General secretary Dave Prentis said the move would be a ‘welcome step towards a fairer society’.

He added: ‘Ed Miliband is beginning to tell people what they can expect from him and the next Labour government. I am sure that this kind of policy will chime with people who have been aghast at this Tory-led coalition’s tax handouts to millionaires and tax credit cuts to millions.’

However, Chief Secretary to the Treasury Danny Alexander said Miliband and shadow chancellor Ed Balls were ‘late to the party’ of wanting to cut taxes for those on low and middle incomes.

‘After 13 years in government, the only action [Labour] took was to raise the amount of tax those on low incomes paid by abolishing the 10p rate. It was the biggest tax mistake they ever made and it has taken them until now to realise their error.

‘The best way to cut taxes for those on low incomes is take them out of tax altogether. That is why Liberal Democrats in government are raising the personal allowance. From April, almost 25 million people will get a further income tax cut so they will be £600 a year better off than under Labour.’

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