Page last updated at 16:58 GMT, Saturday, 19 April 2008 17:58 UK

Downing St denies 10p tax rethink

Gordon Brown
Mr Brown believes the row has been exaggerated by the media

Downing Street has dismissed calls for a rethink over the abolition of the 10p income tax rate and denied it would offer concessions to critics.

Six ministerial aides have urged Prime Minister Gordon Brown to help 5.3m low-paid workers who have lost out.

The Commons Treasury committee has said childless single people earning under 18,500 will lose up to 232 a year.

However, government sources have indicated there may be help later for those worst affected by the tax change.

'Watch this space'

Mr Brown is said to be "furious" that protests against the decision overshadowed his visit to the US this week, BBC political correspondent Norman Smith said.

Earlier, the Treasury denied reports the chancellor was preparing a climbdown over the abolition of the 10p tax band.

EFFECTS OF TAX CHANGES
Winners:
Most people/ with incomes of 18,000+
Under 18,000 but aged 65+ and therefore eligible for higher personal allowances
Under 18,000 but with young children and therefore eligible for child tax credits
Losers:
Under 18,000 and ineligible for working tax credits because under 25
Retired early and therefore ineligible for higher personal allowances
Part-timer working insufficient hours to qualify for tax credits
Different personal circumstances may affect final amounts
Source: PWC

The Daily Telegraph said Treasury officials were working on plans to compensate low-earning workers without children.

The change means that people who would have paid income tax at the lowest, introductory 10% rate will now have to pay the 20% rate.

Under a range of changes which came fully into force in the new tax year, child benefits, state pensions and tax credits have all gone up.

On BBC Radio 4's Any Questions, Treasury Secretary Angela Eagle said people should "watch this space" when she was asked if the government was planning measures compensate for the tax changes.

But a Treasury spokesman later told the BBC there was no thought of "an imminent change to the policy".

He said the chancellor was aware of people's concerns and in future "would take them into account".

Mr Brown is understood to believe the row has been exaggerated by the media and has urged Labour MPs to look at the government's overall tax changes, which he says have helped low-paid families.

On Thursday Mr Brown took time out of his official US visit to telephone ministerial aide Angela Smith and persuade her not to quit over the issue.

'Fog of confusion'

One of five other ministerial aides who protested - MP David Anderson - told the Evening Standard on Friday that Labour should not be "making poor people poorer" while at the same time cutting inheritance tax for the better off.

John McFall, chairman of the Commons Treasury select committee, said the government needed to do more to explain the ramifications to backbench MPs.

"The fog of confusion has descended and it now needs clearing," he said.

Philip Hammond, the shadow chief secretary to the Treasury, said there was "very real anger" in the country about the issue.

Liberal Democrat leader Nick Clegg told the BBC Mr Brown had abolished the 10p rate to get good publicity.

Mr Clegg said: "He did it in order to secure favourable headlines in the following day's newspapers, for cutting the basic rate from 22p in the pound to 20p in the pound.

"In other words, he sacrificed the interests of the poorest.

"That in my view is a scandalously unprincipled way of behaving."

Chairman of the Treasury Select Committee, John McFall on the 10p Tax

Jeff Ennis, PPS to Cabinet Office minister Ed Miliband, said "everybody has concerns" about the move.

Celia Barlow, an aide to Science Minister Ian Pearson, has also written to Mr Brown over the issue.

Yvette Cooper, the chief secretary to the Treasury, insisted that the reforms were fair.

She told the BBC: "The majority of people will benefit, including those on the lowest incomes."

Schools Secretary Ed Balls has called for an end to the public row.

MPs will get a chance to vote on the 10p tax issue the week after next, when ex-minister Frank Field plans to table an amendment to the Finance Bill calling for compensation for those affected.

The row has been seized by the opposition as a sign Mr Brown is losing control of his own party.


SEE ALSO
Labour tax revolt gathering pace
19 Apr 08 |  UK Politics
MP decides not to quit government
17 Apr 08 |  UK Politics
Brown urges new US-Europe links
18 Apr 08 |  UK Politics
PM is like porridge - Labour peer
17 Apr 08 |  UK Politics
Minister defends tax rate changes
07 Apr 08 |  UK Politics

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