Osborne's new dividing line: a 0% tax rate against a 10p tax rate

The Chancellor appears to rule out a 10p tax rate for the Budget and says raising the personal allowance is "a better policy".

Ed Miliband's pledge to reintroduce the 10p tax rate has left the Tories with a dilemma. Having previously hinted that they might adopt the measure, which was first proposed by a Conservative MP, Robert Halfon, do they seek to match Miliband's offer or do they reject it? 

It now looks as if George Osborne has settled on the latter option. In his interview on ITV's The Agenda last night, the Chancellor declared that the coalition had "a better policy" - "a zero per cent tax rate". He pointed out that the increase in the tax-free personal allowance from £6,475 in 2010 to £9,440 (from this April) had already compensated all of those who lost out from Gordon Brown's abolition of the 10p tax rate, adding: "We've taken a million people out of tax altogether so I would say a zero per cent tax rate is going to be a little bit more attractive at an election than a 10% tax rate and that's certainly been our priority."

Coming from the man who remains the Conservatives' chief election strategist, it was a significant statement. The Lib Dems have long made it clear that they will go into the next election promising to raise the personal allowance to £12,500, so that no one on the minimum wage pays any income tax. Osborne's words suggest that the Tories are now more likely to match this offer than are they to cut the starting rate.

It's not an approach that will please all Tory MPs. Halfon is fond of quoting former Conservative chancellor Nigel Lawson, who began his time at the Treasury by raising personal allowances but later reversed direction. He later explained: "I wished to create a large constituency in favour of income-tax reductions. The last thing I wanted to do was to reduce the size of that constituency by taking people out of tax altogether." But the imperative for the Tories to differentiate themselves from Labour now trumps this concern. 

With two years of the parliament remaining, the tax threshold is just £560 from the coalition's target of £10,000 after a larger-than-expected increase in the Autumn Statement. If Osborne chooses to pull a rabbit out of the hat on Budget day (as he usually does), one wonders if it will be to meet this pledge ahead of schedule. Having unambiguously rejected a mansion tax and now cast scorn on the 10p tax rate, the Chancellor has shown that he has no intention of dancing to Labour's tune. 

Chancellor George Osborne leaves 11 Downing Street on January 7, 2013 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.