Unions urge action on tax change

The TUC says five million are losing out because of the changes

Trade unions are urging the government to introduce measures to compensate millions of low-paid workers affected by the abolition of the 10p tax rate.

The TUC says the impact of the changes on the low-paid, combined with generous tax breaks for the super rich, is causing "huge resentment".

It estimates it would cost £550m to help five million affected workers.

The Treasury says the minimum wage, tax reforms and credits mean the low-paid are better off than they were in 1997.

It is not surprising that average and low-earners resent any increase in their tax bills Brendan Barber

TUC general secretary Brendan Barber said the abolition of the 10p band had come as a "further blow" to workers whose finances were already being squeezed by rising food, energy and borrowing costs.

He suggested the government end the remaining tax breaks for so-called "non-domicile" UK residents to raise the necessary funds to compensate those who have lost out.

These are people who live in the UK but are classed as living abroad for tax purposes - a practice Mr Barber described as "scam".

Addressing the North West TUC in Liverpool, he said: "When it is so clear that the growing numbers of super-rich are not paying their fair share of tax, it is not surprising that average and low-earners resent any increase in their tax bills.

"The danger for progressive politics is that this leads people to question the fairness of our tax system, which in the longer term risks undermining the pensions, benefits and decent public services that depend on fair taxes."

But a Treasury spokesman said: "The Working Tax Credit means that low paid workers actually get money back from the taxman - at least £1,124 for someone earning less than £10,050."

The basic rate of income tax was cut from 22% to 20% in last year's Budget. The introductory 10% rate was scrapped at the same time.

The changes took effect from Sunday.