In his last budget as Chancellor, Gordon Brown announced he was scrapping the 10p rate of income tax – meaning that low paid workers will now pay 20p in every pound. You’d think a tax hike would’ve made the news but sadly not… Until now:
Gordon Brown has moved to quell a backbench revolt over the abolition of the 10p income tax band amid fears it will hit some low-paid families.
Mr Brown has assured former Labour whip Greg Pope – who tabled a Commons motion calling for action – he will look again at the impact of the changes.
Mr Pope has withdrawn the motion, which was signed by about 30 Labour MPs.
In his final Budget as Chancellor last year, Mr Brown paid for a 2p cut in the basic rate – to 20p – by abolishing the 10p lower rate.
The change, which will affect people’s pay from Sunday, comes less than a month ahead of local elections in England and Wales.
The Institute for Fiscal Studies has calculated that, with number of households affected by the income tax, national insurance and tax credit changes altogether, about 5.3 million families will lose out overall.
After withdrawing the motion, Mr Pope, who is normally loyal to the party leadership, told The Guardian: “I have been given assurances by senior ministers that they will look at its impact, especially on pensioners, some of whom are losing more than £200 at a time of rising fuel costs”.
Mr Brown was confronted by over the issue when he addressed the weekly meeting of the Parliamentary Labour Party on Monday.
Former ministerial aide Nia Griffith, who was among those to tackle him, said it did “not look good” to voters.
“We should have woken up to it sooner and it would have been easier to do something about it earlier on. It’s something we should look at,” she said.
But the prime minister’s spokesman said: “Since 1997, as a result of all the tax and benefit changes that have come into effect, people on low incomes are significantly better off.”
Labour Leeds North East MP Fabian Hamilton said he feared the change would hit young, single people without families.
He said “a number” of backbench MPs who back the government’s general direction were “very concerned”.
Labour MP and former welfare reform minister Frank Field wrote on the Guardian’s Comment is Free site: “A home-made time bomb is ticking away under the government timed to explode just before the local elections.”
He accused the government of “crassness” in changing its taxation policy.
Licensing Minister Gerry Sutcliffe sparked a row on Thursday after he told pub trade newspaper The Morning Advertiser he thought alcohol tax rises announced in this year’s Budget were wrong.
He said: “I think the industry’s right to be upset. We, and I speak as a champion of the pub trade, want the chancellor to change his mind.”
He later backtracked – after the Tories accused the government of being in “disarray” – saying “my comments do not accurately reflect my views”.
Home Secretary Jacqui Smith denied the government was having difficulty maintaining discipline in its ranks.