Ed Miliband's plan to bring back a 10p rate for £1,000 of income would increase tax on the lowest earners from 2015, says the MEP who first proposed the Lib Dem policy of raising personal allowances.
  
WS PB Vince Cable to camea IMG 0493Now Euro MP for the West Midlands, Phil Bennion was the key champion for the £10,000 tax threshold plan on the Lib Dem Federal Policy Committee before the last election. 
 
He said: "Ed Miliband is trying to make up for the biggest tax mistake by Gordon Brown and Ed Balls - but on the face of it, he is now apparently proposing a 10p rate as an alternative to continuing to raise the personal allowance.
 
"The effect of this would be that many low earners would pay more tax than they would under the coalition, which plans to go on raising the zero tax band."
 
"Ed Miliband says he wants to cut taxes for those on low and middle incomes, but instead of bringing back the 10p tax rate, the best way to help those on low incomes is to raise the amount you earn tax free.

"After 13 years in Government, the only action Ed Balls took on tax was to abolish the 10p rate and raise more money from many on low incomes. It was the biggest tax mistake Labour made, but 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 have insisted the coalition raises the Personal Allowance. From April, nearly 25m people will get a further Income Tax cut, so they will be £600 a year better off than under Gordon Brown. 
 
"I have to say I am also unconvinced by the conversion to a Mansion Tax. Labour had 13 years in Government to make property taxes fairer but did nothing.
 
"The inconvenient truth for Labour is that thanks to the Lib Dems in Government, the wealthy are now paying more in each year of this Parliament compared to any year under Labour."
 
The personal allowance before any income tax is payable will rise by a further £235 to £9,440 in April. Labour apparently now proposes a 10p rate of income tax on the next £1,000 of income up to £10,440. But under pressure from Nick Clegg and Vince Cable, the coalition plans further increases in the personal allowance in the rest of this Parliament.
 
Phil Bennion MEP added:
 
"The target is £12,000 before you pay income tax. Even the Tories now accept that the threshold should rise above £10,000. 
 
"I persuaded Vince Cable to back the idea and it was on the front page of the manifesto. It is interesting to see that the Institute for Fiscal Studies strongly backs our view that raising personal allowances is not only fairer but more efficient than a 10p tax band."
 
The IFS response to the 10p tax plan can be seen here: http://www.ifs.org.uk/publications/6606 
 
Summarising, the IFS says: 
 
"The proposal for a new 10p starting rate of income tax, has no plausible economic justification. It would complicate the income tax system and achieve nothing that could not be better achieved in other ways. It appears to repeat the same error perpetrated by Denis Healey in 1978 (undone by Geoffrey Howe in 1980), Norman Lamont in 1992 and Gordon Brown in 1999 (which he himself undid at considerable political cost in 2007). To have observed lower starting rates of tax being introduced and abolished by governments of both complexions over the last three decades and then to propose the same thing again suggests a remarkable failure to learn from history."
 
ENDS
 
Notes:
 
Liberal Democrats in the Coalition Government have increased the amount of money you can earn tax-free every year. In April it will be raised to £9,440, a total tax cut of £600 a year for more than 20m people. Across the West Midlands region, 2 million will receive a further income tax cut and 198,000 low earners will be lifted out of paying tax completely - 27,550 in Birmingham.
 
Breakdown by local authority   tax cut:  lifted out of tax:
Birmingham                           299,800   27,550
Coventry                               112,300   10,690
Dudley                                  121,100   12,640
Herefordshire                          63,300     7,400
Sandwell                                95,500    10,490
Shropshire                            112,100    13,080
Staffordshire                         334,200    30,040
Solihull                                   79,500     7,000
Stoke-on-Trent                        94,500     9,880
Telford & Wrekin                     69,200     8,720
Walsall                                   87,700     8,990
Warwickshire                         230,500    20,120
Wolverhampton                       80,200     8,350
Worcestershire                      220,100    23,070
 
  • In 2013, someone working full time on the minimum wage will see their Income Tax bill cut in half compared to what they were paying under Labour.
  • By April we will have taken more than 2m low-income workers out of paying tax altogether. The majority will be women.
  • The policy of increasing the amount of money you can earn tax-free to £10,000 was pushed through the Lib Dems Federal Policy Committee and into the manifesto by Dr Phil Bennion before the last election. He also convinced Vince Cable to back the idea, which is now being carried into government by Lib Dem Ministers. By 2015 there will be a total tax cut of £700 a year for most people.
  • Beyond that, we want to increase the tax-free allowance further until it reaches the same level as the Minimum Wage.

Labour’s record of unfair taxes: Labour cut tax for millionaires every single year until their last month, while increasing tax on low earners by scrapping the 10p tax rate.  Under Labour, someone on the Minimum Wage paid £1,000 in Income Tax. We have cut their tax bill in half and under our future plans, they would pay nothing. Labour helped the richest in society when they cut Capital Gains Tax for hedge fund managers and cut tax on millionaires’ pension pots. 

Conservatives tax cuts for the richest: The only tax cuts the Conservatives support are ones for the very rich. At the General Election, their priority was to cut inheritance tax for millionaires. In the Coalition, Liberal Democrats have blocked these plans and instead are cutting taxes for millions.