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.

Photo: Getty
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Who will win in Manchester Gorton?

Will Labour lose in Manchester Gorton?

The death of Gerald Kaufman will trigger a by-election in his Manchester Gorton seat, which has been Labour-held since 1935.

Coming so soon after the disappointing results in Copeland – where the seat was lost to the Tories – and Stoke – where the party lost vote share – some overly excitable commentators are talking up the possibility of an upset in the Manchester seat.

But Gorton is very different to Stoke-on-Trent and to Copeland. The Labour lead is 56 points, compared to 16.5 points in Stoke-on-Trent and 6.5 points in Copeland. (As I’ve written before and will doubtless write again, it’s much more instructive to talk about vote share rather than vote numbers in British elections. Most of the country tends to vote in the same way even if they vote at different volumes.)

That 47 per cent of the seat's residents come from a non-white background and that the Labour party holds every council seat in the constituency only adds to the party's strong position here. 

But that doesn’t mean that there is no interest to be had in the contest at all. That the seat voted heavily to remain in the European Union – around 65 per cent according to Chris Hanretty’s estimates – will provide a glimmer of hope to the Liberal Democrats that they can finish a strong second, as they did consistently from 1992 to 2010, before slumping to fifth in 2015.

How they do in second place will inform how jittery Labour MPs with smaller majorities and a history of Liberal Democrat activity are about Labour’s embrace of Brexit.

They also have a narrow chance of becoming competitive should Labour’s selection turn acrimonious. The seat has been in special measures since 2004, which means the selection will be run by the party’s national executive committee, though several local candidates are tipped to run, with Afzal Khan,  a local MEP, and Julie Reid, a local councillor, both expected to run for the vacant seats.

It’s highly unlikely but if the selection occurs in a way that irritates the local party or provokes serious local in-fighting, you can just about see how the Liberal Democrats give everyone a surprise. But it’s about as likely as the United States men landing on Mars any time soon – plausible, but far-fetched. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.