10p tax - Round 2

The 10p injustice returns to practical politics this week with Wednesday's Budget. This long drawn out and wretched saga, acts like a cautionary tale of the Government's loss of direction.

The story is well known. In his last Budget Gordon Brown announced a 2p reduction in the standard rate of tax to be paid for, substantially, by the abolition of the 10p starting rate. While most people gained, there was a very significant number of lower paid workers who lost out.

The Government, at first, thought it could bluff its way out of the crisis. Parliamentary questions were simply not answered and then, after threats of raising the issue with the Speaker, replied to at the very last possible moment, i.e. minutes before I was due to move an amendment calling on the Government to progress over the next 12 months a full compensation package. No such package was forthcoming.

The Government has been less than frank in another respect. The Labour Party champions individual taxation believing that it strengthens the position of women in households. The Government has refused to present information on the number of individual losers from the 10p rate's abolition: it only gives the number of households made worse off by its move.

This statistical sleight of hand minimises the number of losers. Most of those who lost out from this tax change were women for the very simple reason that they are, generally speaking, on lower earnings.

Many of the losers live in households where, again generally speaking, male workers gained from the reduction of 2p in the standard rate. If the total household income showed a plus, the Government excludes it from its official data on those households who lost out - where one member, usually the woman, lost out.

A diary highlighting the main events in the 10p saga is appended. Under pressure the Government brought forward a compensation package that was so cack-handedly constructed that, despite spending £2.7 billion, 1.1 million households and 6 million individuals were still left worse off.

Given the amount the Government was spending on the rescue package I did not believe it expedient to proceed with a blocking motion to the Budget. I also doubted whether I would carry enough Labour MPs with me to take the Government to the wire. I also believed the reassurances Government ministers gave that they would do all in their power, later, to compensate fully the losers.

Some Labour MPs were critical of my tactics and they have been proved to be right. The promise that this issue would be dealt with as fully as the Government could in the November 2008 Pre Budget Report proved bogus. So today, 32 Labour MPs have signed an Early Day Motion Greg Pope and I have tabled calling for action in Wednesday's budget. The EDM's wording is:

That this House records with real disappointment that up to 3.8 million individual taxpayers are still worse off as a result of the abolition of the 10 pence tax rate; registers that the two measures the Government have since announced do not yet compensate them fully; and calls on the House to secure justice for this group of low tax paying workers at the next Budget.

Aneurin Bevan once remarked that the language of socialism was priorities. I want to believe that Wednesday's Budget will show such a great ranking of priorities that ensures justice for all the 10p tax losers.

The 10p Timeline

21^st March 2007	Budget 2007. Standard rate of tax reduced from 22 per cent to 20 per cent. The 10 per cent starting rate was abolished. The changes meant that all those earning between £5,200 and £18,500 were net losers from the tax changes.
25^th June 2007	Finance Bill Amendment. The Amendment was defeated by a Labour-Conservative coalition. Seven Labour Members voted for the amendment.
Autumn 2007	HM Treasury confirmed that the number of losing households was 5.3 million (PQ 147819). HM Treasury confirmed that taxation models cannot be run to take into account the actual uptake of tax credits and benefits. But it was possible to identify the losing groups: - families without children not receiving tax credits; and, - couple families receiving tax credits but whose incomes were taxed more than the increase in tax credit payments made up. The greatest loss would have been £232 per year for someone earning £7,755.
12^th March 2008	Budget 2008. No compensatory measures were announced.
21^st April 2008	Finance Bill introduced to the Commons. The Government confirmed that no compensation could be brought forward as the financial year had begun. Finance Bill Amendment to Clause 3 placed down with support from 46 Labour Members.
23^rd April 2008	PMQs: Prime Minister announced that the Government would look at compensation proposals. Chancellor wrote to the Chairman of the Treasury Committee setting out proposals. Clause 3 Amendment withdrawn.
24^th April 2009	Chancellor confirms the package will back-date compensation to the beginning of the financial year.
13^th May 2008	Chancellor announced an increase of £600 in the personal allowance, to come into effect in September 2008. This left 1.1 million households still not fully compensated. The measure cost £2.7 billion, paid for by borrowing. The Chancellor confirmed that he would return to those who were still not fully compensated in the 2008 Pre Budget Report.
24^th November 2008	Pre Budget Report. The PBR made permanent the £600 increase in the personal allowance and increased the personal allowance by £130 for the financial years 2009-11. The move reduced to 0.5 million households, by 2011-12, the number of loosing households.
2^nd April 2009	Letter to the Chancellor concerning Budget 2009. EDM 1279 tabled with initial support from 32 Labour Members.
22^nd April 2009	Budget 2009

Date added: Tuesday 21st April 2009
Latest updated: Thursday 30th April 2009

Comments

It must be very sad for MPs like Frank Field to see their party doing things like this. I just cannot understand what they are playing at. out of control I think
Report this post - Anonymous

Frank, You and a multitude of low earners have been treated with contempt by Brown. Glad to see that you remain undaunted but please do not let him or Darling deceive you again. You must realise better than most what an atrocious Prime Minister we have. Don't be afraid to inflict defeat on this wretched government. If that provokes a vote of confidence then vote against the government or abstain. We need a general election at the earliest opportunity before even more harm is inflicted on the country.
Report this post - Anonymous

The 10p rate was not abolished - it was increased to 20p. The Government failed to do the decent thing and just reverse their decision. Instead they introduced half-measures which failed to fully address the problem they had caused by their ridiculous politicking. Typical New Labour trick, but hopefully we don't have to tolerate it for much longer. Frank - you need to cross the floor - but not just yet. You have to make sure that when you do, you do as much damage as possible. Six weeks before the next election sounds about right.
Report this post - Anonymous