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FactCheck: temporary 10p tax?

By Channel 4 News

Updated on 09 May 2008

Was the change to the 10p tax rate just a "short term measure"? FactCheck investigates.

The claim

"We were always clear [the 10p tax rate] was a short-term measure."
James Purnell, work and pensions secretary, Question Time, BBC One, 8 May 2008

The background

The fiasco over the scrapping of the 10p tax rate last month continues to haunt the government, with an opinion poll out today showing Labour's popularity has dropped to a record low.

Labour has promised to compensate the 5.3m million households thought to be left worse off by the abolition of the starting rate - although quite how it will do this has yet to be confirmed.

This week the government has been trying to justify the move with a new claim: on television last night a cabinet minister claimed it had always been clear that the 10p rate, introduced in 1999, wouldn't be here to stay.

According to Work and Pensions Secretary James Purnell, the party had said from the start that the rate was temporary, because it was a "short-term measure to target poverty and tax credits are the best way of doing that".

This was news to FactCheck. Was the work and pensions secretary speaking out of turn?

Hardly: the prime minister called the 10p rate a "transitional measure" on Andrew Marr's show on Sunday (4 May), and culture secretary (and former treasury minister) Andy Burnham made similar noises on Wednesday's edition of the Daily Politics.

So what's going on? Was the government clear - and if so, when?

The analysis

Time to trawl through the 10p files. The first reported mentions of a lower starting rate come in November 1995, from the then-shadow chancellor Gordon Brown.

"Brown pledges a starting rate of 10p" was the headline in The Times on 20 November1995.

"Our long-term objective is a new lower starting rate of 15p or preferably 10p," he said. Long-term objective? Doesn't exactly sound very temporary.

The idea of a 10p or 15p rate - to be combined with changes to the benefit system, more job opportunities and a minimum wage - knocked around for the next year or so, popping up in speeches at the party's conference in 1996.

The promise was firmed up in a key speech to business leaders in January 1997, when Brown talked of his ambition "to introduce a new lower starting rate of tax of 10 pence to encourage work and help all hard-working families".

That long-term word was there again in the party's 1997 manifesto, when it declared: "Our long-term objective is a lower starting rate of income tax of ten pence in the pound."

"This goal," it continued, "will benefit the many, not the few".

The manifesto added that "we will also examine the interaction of the tax and benefits systems so that they can be streamlined and modernised, so as to fulfil our objectives of promoting work incentives, reducing poverty and welfare dependency, and strengthening community and family life."

But nowhere did it say that one would be dependent on the other - or have a shelf life.

Brown may reckon new measures have replaced the need for the 10p band, but even now, he doesn't make it "clear" that the rate was only ever meant to be temporary.

What about when it came to the tax cut crunch time? In his 1998 budget speech, Brown promised to introduce the 10p starting rate when it was right for the economy.

And it was right by the next budget, when he brought the tax rate in super-quick. "This 10p rate will not start in April 2000, like other income tax changes we are making today ... it will be delivered a few weeks from today. People will see it in their pay packets in May."

He also cut the basic rate to 22p; but again, no mention was made of either measure being temporary.

Fast forward eight years, to the 2007 budget. Here's how Brown announced that the 10p tax had had its day.

"Having put in place more focused ways of incentivising work and directly supporting children and pensioners at a cost of £3bn a year, I can now return income tax to just two rates by removing the 10p band on non savings income."

So Brown may reckon new measures have replaced the need for the 10p band, but even now, he doesn't make it "clear" that the rate was only ever meant to be temporary.

In fact, it's only over the past few weeks that the "transitional defence" has been spelled out in public.

The respected House of Commons library - at a request from a Conservative MP - also investigated whether the 10p rate was described as transitional before 2007. "No", was its conclusion, "it does not appear to have been described that way".

The verdict

If the government did see the 10p tax rate as a "transitional" measure - albeit one that existed for a not-inconsiderable nine of their 11 years in office - it's not something that was mentioned in their public statements until after the row exploded over its scrapping.

The government's wider point is that their reforms have, in general, helped those on lower incomes since 1997. But as the government is now finding to its cost, that kind of wider picture means little when people are actually noticing a sudden difference in their pay packets.

To say, as the work and pensions secretary did yesterday, that it was always clear this had been a temporary measure is a rewrite of history. Not only was it never clear, it seems fair to say that it wasn't even suggested until very recently.

FactCheck rating: 4.5

How ratings work

Every time a FactCheck article is published we'll give it a rating from zero to five.

The lower end of the scale indicates that the claim in question largely checks out, while the upper end of the scale suggests misrepresentation, exaggeration, a massaging of statistics and/or language.

In the unlikely event that we award a 5 out of 5, our factcheckers have concluded that the claim under examination has absolutely no basis in fact.

The sources

Labour party 1997 manifesto
Budget speech 1998
Budget speech 1999
Budget speech 2007
House of Commons Hansard debates, 28 April 2008

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