UK Politics

The taxing question: 10p or not 10p?

Ed Miliband at the Fabian Society
Image caption Ed Miliband has promised to resurrect the 10% income tax rate

"I have always believed that the next election will be summed up in three words: cost of living."

The Conservative MP Robert Halfon is sitting in his office in Parliament, a copy of the left-leaning New Statesman lying on his desk.

The magazine's leader column doesn't make a habit of praising Tory MPs, but it has made an exception for Mr Halfon.

"Lessons for Labour from an Essex Tory MP" reads the headline on its editorial.

"That's going on the back of my bathroom door!" he tells me proudly.

The New Statesman thought Mr Halfon's campaign to restore a lower rate of income tax of 10p in the pound was such a good one, Labour ought to give it a look too.

There had already been praise from the online Bible of the Conservative grassroots, Conservative Home, the Daily Mirror and Gavin Kelly, the chief executive of the think tank the Resolution Foundation, who worked in Downing Street for Gordon Brown.

'All hell broke loose'

Mr Brown had both introduced the 10p rate, back in 1999 and scrapped it in 2007.

Hours later, Prime Minister David Cameron gave a nod to Mr Halfon's campaign in the Commons, and hours after that the Labour leader Ed Miliband said a future Labour government would reincarnate the 10p rate.

The scrap that has broken out over the ownership of the idea is an indicator of the importance of the fight for the political territory it is all about: people's standard of living, and the cost of living.

Image caption Gordon Brown was criticised over his decision to get rid of the lowest rate of income tax in 2007

"The 10p rate of income tax had an iconic status, particularly for many people on relatively low pay, who felt it was a bit of the tax system on their side. All hell broke loose when it was abolished," Gavin Kelly from the Resolution Foundation told BBC Radio 4's PM.

"We live in a time when people are feeling huge pressures on their family budgets, on their living standards and it is quite hard for governments and opposition parties to know exactly what to say and what to do about that."

Mr Halfon is philosophical that his idea - originally a Labour idea - has been nicked. By Labour.

He hopes Ed Miliband's attraction to it spurs the government to introduce it first and has already detected the government is listening to his argument.

"It is interesting, when you do other things you occasionally get raised eyebrows from the whips and one or two comments here and there. But on this they have been very open and have been listening carefully.

"I did a debate on this in Westminster Hall and the Treasury minister's response on this was very interesting and he actually went through the history of how Gordon Brown repealed the 10p tax and suggested that had been a mistake."

The specifics of how Mr Halfon would like to see the policy implemented and Labour's plan do vary, but the headline idea is the same.

But others are not sure it's a wise plan, however it is introduced.

'Biggest issue'

"One of my concerns is that if we are going to look to simplify our personal tax system and perhaps merge income tax with National Insurance, this measure makes that even more difficult because it creates even more marginal rates," Ryan Bourne from the free-market think tank the Centre for Policy Studies said.

Mr Bourne is concerned its reintroduction will make an already baffling tax system even more baffling.

"The way that it interacts with National Insurance and Tax Credit withdrawal means you get lots of deviations in that marginal rate across low rates of income and that can't be good for simplifying the tax system in the longer term."

For Robert Halfon, "tax-cutting is as much political as it is economic". In other words, it is about the signal it sends to the electorate and a 10p rate of income tax introduced by the Conservatives might help the party shake off the "party for the rich" tag its opponents like to throw around its neck.

Gavin Kelly from the Resolution Foundation agrees about both the power of the idea to shape perceptions of the political parties and the significance of winning that tussle.

"Make no mistake, this is the biggest issue in British politics today and tomorrow. It is not going away. The whole issue of living standards and more specifically the cost of living is an enormous deal for millions and millions of voters for all political parties all over the country and of course all the parties know that."

"They struggle to find simple ways of explaining what they can do about it because the problems people are on the end of are quite deep and structural," he adds.

The debate over 10p is likely to be just the opening salvo in a two year battle between now and the next election over which of the parties can best help improve our standard of living, and the cost of living for some of the poorest working families in particular.

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