David Cameron hints government may bring back 10p tax rate

David Cameron hints government may bring back 10p tax rate in move that could put 250 in pockets of every British taxpayer

By
James Chapman

PUBLISHED:

02:02 GMT, 14 February 2013

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UPDATED:

02:26 GMT, 14 February 2013

Change: David Cameron signalled yesterday that the Government may bring back the 10p tax rate axed by Gordon Brown

Change: David Cameron signalled yesterday that the Government may bring back the 10p tax rate axed by Gordon Brown

David Cameron signalled yesterday that the Government may bring back the 10p tax rate axed by Gordon Brown.

The Treasury is thought to be considering plans that have been drawn up by Conservative MPs for a chunk of taxable income – probably the first 2,500 – to be taxed at 10p in the pound rather than the current rate of 20p.

Such a move would put 250 in the pockets of every taxpayer in Britain.

The Prime Minister fuelled speculation about the plan in Commons exchanges on the economy with Ed Miliband, when he declared: ‘We won’t forget the abolition of the 10p tax rate.’

The Labour leader had attempted to mimic former US president Ronald Reagan, who popularised the campaign question, ‘Are you better off than you were four years ago’

Mr Miliband said figures suggested that
by 2015, people would be worse off in real terms than they were in 2010
because prices have been rising faster than earnings.

Mr Cameron insisted the Government was
giving 24 million basic rate taxpayers a 600 tax cut from April, when
the threshold for income tax is being raised again.

‘The biggest tax cut will be for those
hard-working people on minimum wage going out to work day after day who
have seen their income tax bills cut in half,’ he said. ‘That’s who we
stand for and that’s who we’re helping.’

But he then gave a clear hint that he is
also considering reintroducing the 10p rate of tax scrapped by Gordon
Brown in 2008, a move which seriously dented his government’s
popularity.

Reintroducing the 10p rate for the first 2,500 of income would put another 250 in the pockets of every taxpayer in Britain.

The coalition is committed to raising
the threshold at which people pay income tax to 10,000. But
Conservative MPs are concerned that Chancellor George Osborne has got
little credit for it because few voters notice changes to thresholds,
whereas they pay more attention when tax rates are lowered.

It is unclear how Mr Osborne could
afford big tax cuts in his March Budget, however, since the increase in
the threshold has already cost him billions.

Confrontation: The Prime Minister fuelled speculation about the plan in Commons exchanges on the economy with Ed Miliband, pictured

Confrontation: The Prime Minister fuelled speculation about the plan in Commons exchanges on the economy with Ed Miliband, pictured

But Tory MP Robert Halfon – who ran a
successful campaign to persuade Mr Osborne to freeze the rate of fuel
duty – argued the move would neutralise Labour attacks on the
Government’s decision to cut the top rate of tax from 50p to 45p.

‘A starter rate of 10p would help us to
counter the Labour war-cry that the Coalition is only interested cutting
taxes for millionaires,’ he said.

‘It would prove to the electorate, that
this Government is on a moral mission to help the poor, by boosting the
cash income of a worker on minimum wage by more than 250 a year.’

Mr Cameron told MPs that the Government had frozen council tax, cut petrol duty and was legislating for cheaper energy bills.

'That is what we have done while having a
top rate of tax that is higher than any year you were ever in the
Treasury,’ he told Mr Miliband.