"Brown's mistake" has already been reversed

The personal allowance has grown to undo any losses the abolition of the 10p rate inflicted.

Ed Miliband has committed to introducing a mansion tax, and using the money to fund a re-introduction of the 10p tax band, saying:

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.

The original 10 pence tax band was applied on incomes between £0 and £2,230, once the personal allowance was taken into account. Its abolition was used to fund the reduction in the basic rate of tax from 22p to 20p. But while Miliband says he will "put right [the] mistake made by Gordon Brown", he's not going to be reversing the basic rate cut. Instead, the money will come from the mansion tax.

But the Social Market Foundation's Ian Mulheirn points out that that mansion tax is not expected to raise anywhere near as much as two per cent on the basic rate of tax would. He tells me that their expectation for a mansion tax on houses over £2m is in the low billions — probably around £2bn or £3bn.

But every billion pounds raised would only pay for a 10p tax band of between two and three hundred pounds, he says:

We've got about 30 million income taxpayers in the UK, once you take the personal allowance into account. Assuming that they all would benefit by the full amount, then if you've got £1bn to play with, you could have a tax band of about £330.

A tax band of £330 would return £33 to each taxpayer. If the mansion tax raises the high end of estimates, then the band could be around £1000, returning £100 to each taxpayer. That's not to be sniffed at, but it's less than half of the size of the abolished band. It's not putting right Brown's mistake, but it ameliorates it slightly.

But actually, Brown's mistake has already been largely put right.

In 2007, the last year of the 10p tax rate, the personal allowance stood at £5,035. With the 10p band on top, basic rate tax started at £7,265. Uprated for inflation, that will be worth slightly under £9000 in the tax year starting in 2013.

In that same year, the personal allowance will stand at £9,440. Someone who would in 2007 have been paying only the 10p tax rate is today paying no tax at all. Miliband's actions, if introduced in 2015, will likely introduce a reduced tax rate for people earning between £10,000 and £11,000 to complement a zero tax rate for people earning less than that. That's likely a good thing; but it's a new thing, not a reversal of Brown's actions. They have already been undone.

Of course, if you have to delve into uprating tax bands by inflation to prove a point, it's not going to fly very well in political debates. That's why, as George writes, politically, the move is a masterstroke.

Brown walks through Rugby. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
Show Hide image

Why are boundary changes bad for Labour?

New boundaries, a smaller House of Commons and the shift to individual electoral registration all tilt the electoral battlefield further towards the Conservatives. Why?

The government has confirmed it will push ahead with plans to reduce the House of Commons to 600 seats from 650.  Why is that such bad news for the Labour Party? 

The damage is twofold. The switch to individual electoral registration will hurt Labour more than its rivals. . Constituency boundaries in Britain are drawn on registered electors, not by population - the average seat has around 70,000 voters but a population of 90,000, although there are significant variations within that. On the whole, at present, Labour MPs tend to have seats with fewer voters than their Conservative counterparts. These changes were halted by the Liberal Democrats in the coalition years but are now back on course.

The new, 600-member constituencies will all but eliminate those variations on mainland Britain, although the Isle of Wight, and the Scottish island constituencies will remain special cases. The net effect will be to reduce the number of Labour seats - and to make the remaining seats more marginal. (Of the 50 seats that would have been eradicated had the 2013 review taken place, 35 were held by Labour, including deputy leader Tom Watson's seat of West Bromwich East.)

Why will Labour seats become more marginal? For the most part, as seats expand, they will take on increasing numbers of suburban and rural voters, who tend to vote Conservative. The city of Leicester is a good example: currently the city sends three Labour MPs to Westminster, each with large majorities. Under boundary changes, all three could become more marginal as they take on more wards from the surrounding county. Liz Kendall's Leicester West seat is likely to have a particularly large influx of Tory voters, turning the seat - a Labour stronghold since 1945 - into a marginal. 

The pattern is fairly consistent throughout the United Kingdom - Labour safe seats either vanishing or becoming marginal or even Tory seats. On Merseyside, three seats - Frank Field's Birkenhead, a Labour seat since 1950, and two marginal Labour held seats, Wirral South and Wirral West - will become two: a safe Labour seat, and a safe Conservative seat on the Wirral. Lillian Greenwood, the Shadow Transport Secretary, would see her Nottingham seat take more of the Nottinghamshire countryside, becoming a Conservative-held marginal. 

The traffic - at least in the 2013 review - was not entirely one-way. Jane Ellison, the Tory MP for Battersea, would find herself fighting a seat with a notional Labour majority of just under 3,000, as opposed to her current majority of close to 8,000. 

But the net effect of the boundary review and the shrinking of the size of the House of Commons would be to the advantage of the Conservatives. If the 2015 election had been held using the 2013 boundaries, the Tories would have a majority of 22 – and Labour would have just 216 seats against 232 now.

It may be, however, that Labour dodges a bullet – because while the boundary changes would have given the Conservatives a bigger majority, they would have significantly fewer MPs – down to 311 from 330, a loss of 19 members of Parliament. Although the whips are attempting to steady the nerves of backbenchers about the potential loss of their seats, that the number of Conservative MPs who face involuntary retirement due to boundary changes is bigger than the party’s parliamentary majority may force a U-Turn.

That said, Labour’s relatively weak electoral showing may calm jittery Tory MPs. Two months into Ed Miliband’s leadership, Labour averaged 39 per cent in the polls. They got 31 per cent of the vote in 2015. Two months into Tony Blair’s leadership, Labour were on 53 per cent of the vote. They got 43 per cent of the vote. A month and a half into Jeremy Corbyn’s leadership, Labour is on 31 per cent of the vote.  A Blair-style drop of ten points would see the Tories net 388 seats under the new boundaries, with Labour on 131. A smaller Miliband-style drop would give the Conservatives 364, and leave Labour with 153 MPs.  

On Labour’s current trajectory, Tory MPs who lose out due to boundary changes may feel comfortable in their chances of picking up a seat elsewhere. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.