Local MP Nia Griffith, who was one of the first to challenge Gordon Brown on his abolition of the 10p tax rate, has welcomed Ed Miliband’s announcement that Labour will reintroduce a 10p rate.
“Back in Spring 2007, I was concerned at the budget announcement abolishing the ten pence tax rate, precisely because it would hit those on low and moderate incomes, and it was not long before perceptive local individuals brought me worked examples of what they would lose. There was such excitement at the time about the reduction in standard income tax rate from 22p to 20p, that abolition of the 10p rate didn’t get a look-in. I raised it both in writing with the treasury team, and directly with Gordon Brown in his leadership hustings. The answer I got was that the effects would be mitigated by tax credits. Now certainly the introduction of tax credits was a cost effective way of targeting money at the households most in need, but because they are related to total household income, taking into account what partners earn and if you have children, they did not solve the problem for many people on modest incomes who stood to lose out from the abolition of the 10p tax rate.
But of course, as with so many budget announcements, it was only nearly a year later in February 2008, just weeks away from the implementation of the change that the national media suddenly began to take an interest in the fact that I had been raising the issue with Prime Minister Gordon Brown and Chancellor Alistair Darling at the parliamentary Labour Party meetings. And then when people finally woke up to what was happening, there was uproar, not just from those who would be personally affected, but from Labour Party supporters far and wide who saw it as fundamentally unfair, and contrary to our principles of redistribution, and our core belief that we should ask more from those who earn more and less from those who earn less.
That’s why I am very glad that Ed Miliband has said that we need to admit the mistake and return to a more graduated taxation regime, which is one way of trying to make our society fairer. It needs to be part of a wider strategy of improving basic wage levels, so that employers pay workers a proper wage rather than relying on the state topping up wages with tax credits. To get the local economy going you need to put money back into the pockets of people on low and moderate income who will spend it here, not give tax breaks to millionaires to stash away abroad.”