The 10p Tax

I have to make an admission. I never thought that the 10p rate of Income Tax was sensible, and I still don't think it is. I wouldn't have bothered make this admission, except that Ed Miliband has announced today that he thinks its a good idea. It could be his first policy commitment! He has gone as far as to denounce Gordon Brown's decision to axe it. Though it should be noted that Ed Balls is telling us that its not yet certain to be a manifesto commitment.

Disagreeing with Ed Miliband is no bother. I disagree with most of what he says. But to disagree with Robert Halfon MP is an entirely different matter. I often sit by Robert in the Chamber. He is a star - and its the first time I can recall disagreeing with him. Now I do agree that we should be cutting the Income Tax of those on lowest incomes, so I'd better explain my own position on this area of tax policy.

I believe that the Conservative Party should commit in our next manifesto to raise the tax-free personal allowance to £11,000. I've been hugely enthusiastic about the massive increases in the tax-free allowance the Coalition Gov't has introduced - which will have risen to £10,000 by the next election. We should build on this, and take it further in the next parliament. I'd like to have said £12,000 allowance, but it would cost too much.

Usually, discussion about the 10p tax rate is based on a £9205-£12,000 range. We are told this is likely to cost around £6billion per annum in lost revenue. For the same cost to the Treasury, the tax-free personal allowance could be raised to £10,620. Even at this modest level, all those earning up to £11,800 would be better off than under a new 10p tax band with a £12000 limit. Only those earning £11,800-£12,000 would be worse off. And crucially, we would also be increasing the age-related personal allowance, the freezing of which has caused much concern to so many of my constituents. Personally, I'd like us to go a bit further than £10,620, which is why I advocate an £11,000 upper limit. I'd lay a sizable bet that our Coalition partners will commit to a £12,000 upper limit in their manifesto.

Main reason that I oppose a 10p tax rate is the matter of added complexity in the tax system. (I also believe there should be a top rate of 40p, which is what the Labour Party operated throughout its 13 yrs in office - though I accept that 'politics' rules that out at present). All we should have is two rates of tax, and one level of personal allowance. Keep it simple. While some countries move towards a flat tax, we should not be moving in the opposite direction.  There are other reasons as well, but lets not complicate the case.

What I do find hugely encouraging however is that whenever I hear Robert talk about the 10p tax rate its that we have a Conservative voice (and a respected one at that) making the case for levying less tax on those on lowest incomes. I approve of that big-time. I suppose the differences between us are not that great.