"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
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The Fire Brigades Union reaffiliates to Labour - what does it mean?

Any union rejoining Labour will be welcomed by most in the party - but the impact on the party's internal politics will be smaller than you think.

The Fire Brigades Union (FBU) has voted to reaffiliate to the Labour party, in what is seen as a boost to Jeremy Corbyn. What does it mean for Labour’s internal politics?

Firstly, technically, the FBU has never affliated before as they are notionally part of the civil service - however, following the firefighters' strike in 2004, they decisively broke with Labour.

The main impact will be felt on the floor of Labour party conference. Although the FBU’s membership – at around 38,000 – is too small to have a material effect on the outcome of votes themselves, it will change the tenor of the motions put before party conference.

The FBU’s leadership is not only to the left of most unions in the Trades Union Congress (TUC), it is more inclined to bring motions relating to foreign affairs than other unions with similar politics (it is more internationalist in focus than, say, the PCS, another union that may affiliate due to Corbyn’s leadership). Motions on Israel/Palestine, the nuclear deterrent, and other issues, will find more support from FBU delegates than it has from other affiliated trade unions.

In terms of the balance of power between the affiliated unions themselves, the FBU’s re-entry into Labour politics is unlikely to be much of a gamechanger. Trade union positions, elected by trade union delegates at conference, are unlikely to be moved leftwards by the reaffiliation of the FBU. Unite, the GMB, Unison and Usdaw are all large enough to all-but-guarantee themselves a seat around the NEC. Community, a small centrist union, has already lost its place on the NEC in favour of the bakers’ union, which is more aligned to Tom Watson than Jeremy Corbyn.

Matt Wrack, the FBU’s General Secretary, will be a genuine ally to Corbyn and John McDonnell. Len McCluskey and Dave Prentis were both bounced into endorsing Corbyn by their executives and did so less than wholeheartedly. Tim Roache, the newly-elected General Secretary of the GMB, has publicly supported Corbyn but is seen as a more moderate voice at the TUC. Only Dave Ward of the Communication Workers’ Union, who lent staff and resources to both Corbyn’s campaign team and to the parliamentary staff of Corbyn and McDonnell, is truly on side.

The impact of reaffiliation may be felt more keenly in local parties. The FBU’s membership looks small in real terms compared Unite and Unison have memberships of over a million, while the GMB and Usdaw are around the half-a-million mark, but is much more impressive when you consider that there are just 48,000 firefighters in Britain. This may make them more likely to participate in internal elections than other affiliated trade unionists, just 60,000 of whom voted in the Labour leadership election in 2015. However, it is worth noting that it is statistically unlikely most firefighters are Corbynites - those that are will mostly have already joined themselves. The affiliation, while a morale boost for many in the Labour party, is unlikely to prove as significant to the direction of the party as the outcome of Unison’s general secretary election or the struggle for power at the top of Unite in 2018. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.