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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Sadiq Khan gives Jeremy Corbyn's supporters a lesson on power

The London mayor doused the Labour conference with cold electoral truths. 

There was just one message that Sadiq Khan wanted Labour to take from his conference speech: we need to be “in power”. The party’s most senior elected politician hammered this theme as relentlessly as his “son of a bus driver” line. His obsessive emphasis on “power” (used 38 times) showed how far he fears his party is from office and how misguided he believes Jeremy Corbyn’s supporters are.

Khan arrived on stage to a presidential-style video lauding his mayoral victory (a privilege normally reserved for the leader). But rather than delivering a self-congratulatory speech, he doused the conference with cold electoral truths. With the biggest personal mandate of any British politician in history, he was uniquely placed to do so.

“Labour is not in power in the place that we can have the biggest impact on our country: in parliament,” he lamented. It was a stern rebuke to those who regard the street, rather than the ballot box, as the principal vehicle of change.

Corbyn was mentioned just once, as Khan, who endorsed Owen Smith, acknowledged that “the leadership of our party has now been decided” (“I congratulate Jeremy on his clear victory”). But he was a ghostly presence for the rest of the speech, with Khan declaring “Labour out of power will never ever be good enough”. Though Corbyn joined the standing ovation at the end, he sat motionless during several of the applause lines.

If Khan’s “power” message was the stick, his policy programme was the carrot. Only in office, he said, could Labour tackle the housing crisis, air pollution, gender inequality and hate crime. He spoke hopefully of "winning the mayoral elections next year in Liverpool, Manchester and Birmingham", providing further models of campaigning success. 

Khan peroration was his most daring passage: “It’s time to put Labour back in power. It's time for a Labour government. A Labour Prime Minister in Downing Street. A Labour Cabinet. Labour values put into action.” The mayor has already stated that he does not believe Corbyn can fulfil this duty. The question left hanging was whether it would fall to Khan himself to answer the call. If, as he fears, Labour drifts ever further from power, his lustre will only grow.

George Eaton is political editor of the New Statesman.