Rejoice! Labour has a policy. Even better it’s a Lib Dem policy.

Yesterday at PMQs Ed Miliband channelled Ronald Reagan. Today he’s channelling Vince Cable:

Here’s what Ed has just announced:

Let me tell you about one crucial choice we would make, which is different from this government. We would tax houses worth over £2 million. 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 10 pence 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.

No more details as yet — we’ve another two years to wait for them apparently: “We’ve rightly said that we will only set out our tax and spending commitments at the next general election.” Fair enough, except it makes it a bit tricky to answer the two critical questions: 1) will the tax cut cost more than the mansion tax raises; and 2) will it help the poorest paid most?

While we’re waiting for Labour to help us work that out, it’s worth looking at the Centre for Policy Studies’ analysis of the impact of this proposal (first put forward by Tory MP Robert Halfon last month) compared with the Lib Dems’ stated preference to lift the income tax threshold to exempt all earning less than the minimum wage. Here’s the graph that shows the effects most clearly:

cps 10p tax option

In summary: the Lib Dem proposal costs more, but would help the low-paid more. The Labour/Halfon proposal is cheaper, but helps the low-paid less.

Personally I’m not sure either are the right priority just now. I’d prefer we looked at unifying income tax and national insurance to take the lowest paid out of personal taxation altogether and use the revenue from the mansion tax to smooth out the transition which might otherwise hit pensioners and low-income individuals who don’t work.

PS: our own in-house tax expert, Mark Valladares, looked at this issue last month: Is bringing back the 10p rate band such a good idea?

* Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.

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  • It does not matter whose policy it is only who will/can implement it.

  • “Labour does have a policy after all. Two in fact! It’s just that they’re both Lib Dem policies: tax cuts for low-paid funded by mansion tax”

    Does it matter whether it was a Liberal Democrat idea or not?

    Surely the point is that Liberal Democrats in Government have not been able to introduce these policies, The Tories will not have any bar of it.

    If Labour wins the next election, then they will introduce the policy. The question is, will they be doing it as a majority government or will they be in coalition government with another party and introduce the policy.

    If Labour and Liberal Democrats are already on the same page when it comes to this policy, it gives the Liberal democrats further scope to negotiate on other area’s of policies they would like to see introduced.

  • I think your first question is answered.

    1) will the tax cut cost more than the mansion tax raises
    “with the size of the band depending on the amount raised” I guess that means it will not…..

    What we now need is a definitive of what the Lib Dems will do post 2015, we have a stated preference but not, as I understand it a defined post 2015 policy?

  • Richard Harris 14th Feb '13 - 12:22pm

    Given that the Lib Dems virtually rewrote their manifesto after the election, including cast iron pledges, it comes across as incredibly arrogant that you criticise others for simply leaving the detail until nearer the election. The official reason you abandoned the tuition fee promise was because of the economic data you discovered when you got into power, so seems a little harsh to complain that an opposition party is merely giving a broad idea of what it would do. And as for someone else adopting your mansion tax idea, presumably Labour wouldn’t have to if you’d actually implemented the policy by now? Oh, of course, that was another one that failed to make it through.

  • @matt
    Don’t bet on them implementing it, I remember the top up fees issue too well to trust them that much!

  • So, if Labour has identical policies as the Lib Dems then who is everyone going to vote for? A party that isn’t going to win outright and is widely perceived to have had little influence in coalition or a party that can win outright and implement those policies?

    @Richard Harris
    “The official reason you abandoned the tuition fee promise was because of the economic data you discovered when you got into power”

    But the Lib Dem election campaign clearly stated that the government finances and costings of the manifesto policies had been fully accounted for.

  • @Steve Way

    I can not see Labour doing something like that again this time round, If the policy is written into their mandate, I am pretty confident that they will introduce it.

    Labour are “starting” to set out their vision for a fairer Britain appealing to middle and lower income families. This will be a problem for the Liberal Democrats, because as part of this coalition with the Tories their policies are disproportionally hitting Middle and lower income families.

  • I’m really not impressed with the Labour supporters piling in here.

    Your party has failed to find any policies of its own and is now saying it will do something the Liberal Democrats have had as policy for years.

    Your party is bankrupt of ideas. Glad to see you are now backing Liberal Democrat policy after all.

    Ed is effectively saying he too “agrees with Nick”.

  • @RC

    That is a bit ludicrous to say that. Liberal Democrats might have thought up the idea, but they are totally impotent when it comes to delivering them.

    The Tories will never agree to it and the likelihood of the Liberal Democrats ever being a majority government is about as likely as getting poo out of a rocking horse.

  • @matt
    “I can not see Labour doing something like that again this time round, If the policy is written into their mandate, I am pretty confident that they will introduce it.”

    Tories 1992 Taxes
    Labour 2001 Tuition Fees
    Lib Dems 2010 Tuition Fees

    Sorry but your faith is not born out by the facts, not just from Labour but from all three main stream parties. In all of the cases above the pledges were made in the election campaign. Surely there is even less chance of a promise made two years out ever seeing the light of day irrespective of party……

    Call me cynical but I feel this is designed purely to highlight coalition differences.

  • Miliband also said that they’d reintroduce the 10% tax rate Brown abolished scrapped in the 2007 Budget, and Ed Balls has been supporting this with both describing it as “a very bad mistake.”

    Oh – of course – both were in the Cabinet at the time, therefore both agreed with the policy then despite everyone else telling them it was a “very bad mistake”. I don’t mind people changing their mind, or admitting they were wrong, but I’d really like to know – what was it that convinced them at that time that it would be a good thing? What has changed since then to make us more confident that their judgement is better now?

  • The problem with this Labour proposal is that a mansion tax on properties worth more than £2m would raise only a limited amount. One estimate is £1bn a year. Shared out among 25 million basic rate taxpayers that would be only £40 each. Much smaller than this government’s income tax cuts, and scarcely worth the effort of introducing an extra tax band (a band only £400 wide?).

    Of course, if the tax cut were targeted at (say) the 10% basic rate taxpayers, it would make much more of a difference to them.

  • @Steve Way

    I agree with what your saying.

    Maybe Labour are using tactics to exploit coalition differences, who knows for sure.

    But it does seem rather silly to me for Liberal Democrats to dismiss what Labour have said, I would have thought that if Liberal Democrats played their cards right, it could end up strengthening their own hand in the future.

  • @ Matt

    “Liberal Democrats might have thought up the idea, but they are totally impotent when it comes to delivering them.”

    You know very well why it can’t be done at the moment, so why are you blaming the Lib Dems?

    If there are fewer Tories in parliament next time and enough Lib Dems then it will happen.

  • @ Matt

    “if Liberal Democrats played their cards right, it could end up strengthening their own hand in the future.”

    I think we agree on this. What could be better than Ed Miliband saying that he supports Lib Dem policies? It means that any Labour supporter voting in a constituency where Labour can’t win but the Lib Dems can, can happily vote for the Lib Dems.

  • Geoffrey Payne 14th Feb '13 - 1:43pm

    Stephen say rejoice and that is what we should do. The more political parties that agree with it, the more likely it will be implemented. However I am more impressed with LVT and there are signs that both Labour and the Green Party agree with that as well. We could achieve so much more if we were in a left of centre Coalition.

  • @RC

    I am not blaming the Liberal Democrats, I am saying that you have to be realistic and whenever you are in government with the Tories as a coalition partner. That policy would never have a chance of being implemented.

    Even recently whilst Liberal Democrats thought this policy was under discussion with the cabinet, The Tories were secretly writing to their party donors asking or donations, pledging that Tories will never allow their homes to be taxed.

    Even if at the next election Liberal democrats increased their MP’s but the Tories were still the lager party. The Cons would never accept this as policy, they have pledged it to their big sponsors.

  • Richard Church 14th Feb '13 - 2:34pm

    As the tax threshold is raised, any redistribution using the tax systam is going to have to consider the increasing number who are no longer paying income tax at all, ie those in part time work or not in work at all. They won’t benefit by at all by what Labour or our own party are proposing, but it is Labour that has made all the fuss opposing the 1% benefits increase.

  • Matthew Huntbach 14th Feb '13 - 5:40pm

    Richard Harris

    Given that the Lib Dems virtually rewrote their manifesto after the election, including cast iron pledges, it comes across as incredibly arrogant that you criticise others for simply leaving the detail until nearer the election.

    What do you mean by this? The Liberal Democrats did not win a majority and so they are not in a position to implement every aspect of their manifesto. Isn’t it a rather stupid notion to suppose that because the Liberal Democrats form part of a coalition with a much larger number of Conservative Party MPs they have “rewritten their manifesto”, as if somehow it should be expected that such a government would have purely Liberal Democrat policies? Wouldn’t it then be the case that the Conservatives could rightly be accused of having rewritten their manifesto?

    Isn’t politics about people of different views coming together to try and from a compromise? Isn’t it rather obvious that such a compromise would be somewhere in between those different people’s ideas? Isn’t it rather obvious too that if we have an electoral system which distorts representation in favour of the largest party and against third parties, that any compromise reached will be more towards the view of the largest party than the third party? In the referendum of 2011 the “No” side put this distortion of representation as the best thing about the current system, and they won by two-to-one. So isn’t it rather silly to complain that we have what the people of this country voted for, in 2010 when they voted to make the Conservatives the biggest party, and in 2011 when hey voted to keep the distortion that means the biggest party gets much more of a say than its pure share of the vote would otherwise give it?

  • Richard Harris 14th Feb '13 - 7:57pm

    Matthew Huntbach. No, it is not stupid. I didn’t suggest that the LibDems should be delivering all their manifesto promises. I understand the concept of coalition. But Clegg went beyond that before the election. Of tuition fees he said that the party would “vote against any rise in fees UNDER ANY CIRCUMSTANCES”. In fact he specifically points out in his apology over the matter that as the most likely situation after the election was coalition then the promise was even more ridiculous and ultimately false.
    What I would say is that given that coalition is the only way the LibDems will ever have any type of power, then their manifesto should be treated with even more skepticism than either Labour or Tory manifestos. In effect, the whole manifesto will always have to be rewritten. That in itself is not a criticism, but I don’t think a Libdem is in the moral position to criticise another party for not being specific about policy before an election because they will always, inevitably, going to largely redraft theirs.

  • Richard Harris 14th Feb '13 - 9:10pm

    Sorry, Simon. You know as I wrote it I thought of adding “in the foreseeable future” and just knew someone would pick me up on it! No disrespect intended. I’m sure the Libdems have got as good a chance as anyone in the long term, but I think outright government is still some way off. I’m not as arrogant as all that!

  • Richard Harris 14th Feb '13 - 9:19pm

    …and of course I was referring to central government only …and I could also have added “under the current electoral system” …but I don’t think it changes my argument: is it not true that a party likely to only be in government through coalition should draft it’s manifesto with that in mind, something the author of the famous tuition fee promise failed to do?

  • Richard Harris : you are absolutely 100% right in everything you say. And whilst none of can say that the LibDems will ‘never ‘ be in power except in a Coalition, they seem further away from power than ever before at the moment.

  • Tracy Connell 15th Feb '13 - 8:30am

    It’s not really a policy though is it. It’s just more Labour rhetoric. It won’t be in their manifesto. It’s one of those – if we were in government now we MIGHT do this – kind of things.

    They haven’t got details of how the mansion tax would work or an accurate figure of precisely what it will raise – even though they say this is fully costed. The 10p is only on the first £1,000 of taxable income. By the end of this parliament most of that will be tax free when the Lib Dems put the allowance up to £10,000, with an ambition to put it up to minimum wage. So that really cancels out the need for this 10p tax.

    Also, Labour have previously allocated mansion tax money to restoring tax credits. They can’t have it both ways.

    It’s nothing but hot air. Just a gimmick.

    Labour are given £1m of taxpayers money to come up with policies and don’t have a single one.

  • I really do not get why party members are being so critical of Labour for saying they want to adopt this policy.

    The Liberal Democrats alone have no chance of getting this policy into government either in this coalition with the Tories, or even if events give us another Con/Lib coalition in 2015, even if more Liberal democrats MP’s were elected.
    The Tories will “never” allow a mansion tax whilst they are in government. Only a few months ago, when the Liberal Democrat Ministers and Tories were in negotiations on the chancellors Autumn Statement. Libdems believed that Mansion Taxes were part of the negotiations. The Tories however where at the same time, writing to the donors asking for money, promising them that they will never allow the tax man in to their homes to tax their homes.

    A mansion tax with the Tories is a dead duck.

    Vince Cable quite rightly welcomed the Labours support for this policy. Edd Balls has offered to talks with Danny Alexander to fully costs the proposals and the details.
    That to me seems like sensible politics.

    I see this policy as strengthening the hand of the Liberal Democrats, especially if future coalitions with Labour are a possibility. A shared position with Labour on Mansion Taxes would give the LD further scope to negotiate in other policy area’s they would like to see.
    Alienating Labour seems to me like shooting yourselves in the foot.

  • Miliband is to be congratulated not only for pinching a good idea from the Lib Dems (untainted by Tory ideology) but admitting that he and Ed Balls (as well as Brown) were wrong and apologising for the fact. At least it won’t be turned into song. It’s also good to see that the Labour Party is taking its time- 2015 is a couple of years away and situations change very rapidly.

  • If you wish to criticise ‘pinching policies’ try Cameron…Yesterday, on his visit to Eastleigh, he claimed credit for “Taking thousands of those on low wages out of the tax system”. When challenged that it was the due to LibDems he said, “The last time I looked the Chancellor was a Conservative and it was his budget”,……

  • Lib Dems would obviously welcome the Labour conversion to the Mansion Tax. However, creating a small 10p tax rate is less efficient, more complex, and less targeted than creating a 0p tax rate half the size (i.e. an increase in the tax allowance), as shown by Stephen’s graph. That’s why the Lib Dems are pushing up the allowance instead of creating fiddly little new tax bands.

    This policy is more about rectifying a historic Labour 10p tax mistake in the public mind than being about the best policy.

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