Labour leader Ed Miliband made a dramatic bid to outflank David Cameron on the economy by calling for the 10p rate of income tax to be brought back.
The Labour leader said his predecessor Gordon Brown had been wrong to scrap the band in 2008, and restoring it would help millions of hard-pressed families.
The move could be funded by a new “mansion tax” on homes worth more than £2 million, he insisted.
The announcement was a surprise inclusion in a keynote speech that had been billed as featuring no significant policy.
Tory backbenchers have been campaigning for the 10p rate to be reintroduced in next month’s Budget, and the Prime Minister hinted that he was ready to agree.
But Mr Cameron was left struggling to regain the initiative, accusing Labour of “cobbling the idea together overnight.”
Meanwhile, the Institute for Fiscal Studies (IFS) complained there was “no plausible economic justification” for reintroducing the 10p rate.
Conservatives also warned that the mansion tax plan would trigger a wide-ranging council tax revaluation, and questioned how much revenue would be raised.
Mr Miliband said the policy demonstrated Labour’s “priority to do everything we can to make a difference to people’s living standards.”
He admitted that the tax proposals did not amount to a manifesto pledge, but insisted he was sending a “clear signal” about what the party would do in power.
Mr Cameron, campaigning in Eastleigh ahead of the by-election, said: “My prediction is that they won’t have thought it through or costed it properly and we’ll discover over the course of the day all sorts of problems and issues with a policy that looks like it’s been cobbled together overnight.”
Lib Dem Chief Secretary to the Treasury Danny Alexander said abolishing the 10p rate was Labour’s “biggest tax mistake” and questioned why it had taken them so long to “realise their error.”
But his Cabinet colleague Vince Cable praised the opposition for “seeing sense” over a mansion tax, and said he was still trying to talk the Conservatives round to the idea.
The IFS said the owners of 70,000 £2 million-plus homes would need to be charged £30,000 each to fund Labour’s new 10p rate.
But the think-tank insisted that restoring the band “would complicate the income tax system and achieve nothing that could not be better achieved in other ways”.
TUC general secretary Frances O’Grady said: “Today’s speech acknowledges just how tough it is out there for millions of ordinary people who have seen their living standards plummet.
“Fairer wages and taxes will play a crucial role in building a stronger economic future for the UK.”