Miliband's 67p a week tax cut

By Paul Goodman
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Ed Miliband's pilfering of Robert Halfon's 10p tax rate restoration proposal, balanced out by his borrowing of Vince Cable's plan of a mansion tax on homes worth more than £2 million, is almost completely meaningless.  The Labour leader is not committing to the measure if he wins a majority in 2015. (See Andrew Neil wring this out of Ed Balls above.)  Since neither Ed knows what the Government's future spending plans are, and therefore haven't yet committed Labour either to keeping them or chucking them, it could hardly be otherwise.

All Miliband is saying that were he Prime Minister now, he would fund the 10p cut by the mansion tax hike.  Which he might or might or not do.  Most likely, voters would get the hike, but not the cut.  However, it is a supreme waste of time following that train of ifs any further.

Which is a reminder that Miliband's announcement (cleverly concealed; no leak - which is a bit of a start) is not about economics, but politics.  Which is where the story gets more interesting - a little bit, anyway.  The Labour leader has three main aims, which are roughly as follows.  

• To get ahead of Osborne.  Announcing a measure that you think your opponent might support or has backed is a classic manoevre.  As Chancellor, Alistair Darling pulled much the same stunt on Osborne over inheritance tax.  Miliband has sought to get ahead of what Osborne might have announced in the coming budget.  Osborne, a fellow member of what he calls "the guild" of professional politicians, will admire Miliband's chutzpah.

• To lure Vince Cable and the Liberal Democrat left.  Cable needed no invitation to welcome a proposal which is, after all, his own. “The mansion tax is not just about fairness, it is also about giving the right signals to the economy,” he has said. “I’m glad Mr Miliband has adopted it. I haven’t been able to persuade my Conservative colleagues. I never give up hope.

• To wrong-foot Downing Street.  Number 10 doesn't usually respond to Miliband's speeches, but is attacking him for approving the scrapping of the 10p rate in government and then demanding its restoration in opposition. Halfon is fighting back, arguing that his plan is to fund a 10p band from the revenues gained from the top rate cut, not from a mansion tax.

• To set the Coalition at odds.  Many Conservatives want the 10p rate plan and very few want more property taxes.  The Liberal Democrats want the mansion tax and are opposed to a 10p rate - they want to keep raising thresholds.  This is, in its own way, a piece of triangulation from Miliband.

What about the merits of the 10p tax rate idea itself?  Tim Montgomerie tweets that he likes the combination of it and more property taxes.  I don't like the idea of complicating the system further, but can see the political merits of Halfon's plan.

Policy Exchange says that "under this proposal, net incomes for low paid working families would only increase by 67p a week if they are on in-work benefits. This is because of complex interactions between the tax and benefit system".

Over at Coffee House, Ryan Bourne shares my concern about complicating the tax system, says that raising thresholds is better targetting, and points out that if, as Labour say, the policy would benefit lower earners only, this implies dragging more people into the 40p band.  Miliband's plan may or may not happen after 2015, and it may confuse the Coalition in the meantime, but one thing is certain: he has just raised Halfon's profile even further.